AG opinion on off-street parking VAT (Isle of Wight case)

Advocate General opinion (about 7 pages) on the dispute between UK local authorities and HMRC as to whether municipal off-street parking should attract VAT.

The conclusions of the opinion highlight the discretion that the UK has about the interpretation of the rule that the VAT exemption on services provided by public authorities does not apply where it would significantly distort competition. It also confirms that "competition" includes potential competition.

The reasoning is based on a notion of economic activity, and a rejection of case-by-case competition analysis. For example:

17 ... activities are subject to tax regardless of whether there is actual or potential competition at the level of certain local markets ... Solely the nature of the activity concerned matters.

19 ... Community fiscal policy ..., in accordance with the principle of fiscal neutrality, seeks to make all economic activities subject to VAT.

20 ... the principle of simplicity ... would be seriously undermined by a case-by-case analysis of the state of competition on the relevant markets.

HMRC will presumably see this as a win. The opinion supports its case on potential competition and on the need for a general assessment of the risk of distortion of competition, not a detailed market analysis as used by the UK VAT tribunal. And discretion for the UK, in the absence of specific UK regulations, is arguably discretion for HMRC.

The opinion also suggests that the UK courts might have been wrong to treat off-street parking as eligible for the public authority exemption in the first place.

Note on ECJ Advocate General opinions

For further information or advice please contact Franck Latrémolière.

Filed under ECJ/CFI, Economic activity, VAT.

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