Parking charges VAT ruling awaited

What motorists pay for off-street parking is hanging on a High Court decision linked to an EU ruling that councils must pay VAT on parking revenue.

The councils say they should be exempt because they are public authorities and not "taxable persons" under an EU VAT directive.

But European judges have ruled that even public authorities should pay VAT if exemption gives them an unfair advantage over private companies.

The verdict now rests with the High Court, but the EU ruling increases the chances that HM Customs will win the case and that councils will have to carry on levying the tax.

Historically, UK local authorities accepted that they pay VAT on off-street parking income. But in 2000, the European Court ruled in a Portuguese case that off-street parking income collected by a public authority was not necessarily subject to VAT.

The High Court had sent the issue to Luxembourg for a ruling on what EU law means when it says VAT is payable by public authorities if an exemption "would lead to a significant distortion of competition".

If parking revenues are declared VAT exempt, the remaining three-quarters of the UK's local authorities are likely to add their claims to the 129 already lodged.

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