Fines and penalties are not a tax deductible expenses, meaning the business will not receive tax deduction when incurring them. Read on to find out whether or not your business can reclaim VAT on parking fines.
Fines, penalties, VAT and other taxes
Fines and penalties are not a tax deductible expenses, i.e. the business will not receive tax deduction when incurring them. It is important to note however, that all excess parking charges may not be a fine or a penalty even when they are described as such. Furthermore, the treatment for VAT is not necessarily as you may have thought.
Business purpose
If an employee or director of a business incurs a parking fine while in the course of work the VAT on it can be reclaimed if the business pays for it (and is VAT registered). Parking fines, however, often do not state whether or not VAT has been charged. Where there is doubt on whether or not VAT has been charged it is advisable to check with the organisation which is charging it before it is due to be paid.
When is VAT charged?
Whether VAT is charged or not depends on the issuing body of the fine.
Local authorities – All parking fines issued by local authorities have no VAT on them and thus these should never be included on your VAT returns.
Private car parks – Private car parks such as those operated by NCP, may or may not charge VAT on fines but this would depend on how the charges for overstaying are described.
- If the terms and conditions state overstaying is not permitted and a penalty will be charged for doing so, the fine is not subject to VAT.
- If the terms and conditions state overstaying will result in an additional charge for parking, even if it’s at a higher than standard rate, VAT is payable and you can reclaim it.
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