Car Parking Fine or Penalty

Car Parking Fine - tax deductible or not?

We read a recent posting on social media reminding readers (completely correctly) that there are no circumstances in which parking fines may be deducted in computing taxable profits.

So far so good (or rather, if the nature of your business makes the incurring of parking fines more or less inevitable, as it did for the cash delivery business G4S Cash Solutions (UK) Ltd in UKFTT 239 (TC), so far so bad).

However, it’s important to understand the limitations of the principle. It applies to fines – that is, amounts charged by the authorities (usually local councils but sometimes the police or DVSA) for an infraction of the law when parking. The principle also applies to fines and penalties generally, of course; but it’s parking we’re focussing on here.

By contrast, car parks on private land are often managed by private companies. Such companies don’t levy fines, for the very good reason that they have no power to do so. Some, perhaps most, may take great care to give the impression that they do – for example by making their PCNs (‘Parking Charge Notices’) as similar in appearance as possible to a local council’s PCN (‘Penalty Charge Notice’) – but they don’t.

Rather, as a matter of law, when you park in such a car park, you enter into a contract with the company. That contract has, in effect, a two-tier pricing system:

When you enter the car park, the company will have set out in reasonably legible signage the terms of the offer it’s making: if you act in a particular way – such as buying a ticket, not overstaying your time, parking in the right place, or even avoiding fluffy dice in your car if that’s a requirement the company chooses to impose – then you can park for £X.

Otherwise, it’s £Y: non-negotiable – take it or leave it.

By parking, you accept the terms of their offer. If you subsequently get a PCN from the company, it’s not a fine – it’s nothing more or less than a bill for the price the company claims you agreed to pay for parking.

It follows that whether you have paid £2 for a one-hour stay in the car park or £102 for a 61-minute stay makes no difference for tax purposes. In each case it’s a cost, not a fine. If your purposes in parking your vehicle were wholly and exclusively for business purposes, the cost is tax-deductible: otherwise, it’s not.

The same applies for VAT – if you are registered for VAT and you park in a VAT registered car park and you park there for business purposes, input VAT can be claimed on your next VAT return.

Tolls for bridges, tunnels and roads operated by public authorities are outside the scope of VAT.

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