Car Parking VAT, Partial Exemption

[Chapman]

Would appreciate some expert advice on VAT (Partial Exemption) please, for a brief description see below:-

A Property Developer, which is VAT registered as Partially Exempt, is refurbishing a Car Park on its estate – which is located behind several properties & serves the general public. The properties that are in the closest vicinity of the Car park are a mix of Commercial/Residential buildings & also a mix of Opted to tax properties/non opted to tax properties.

To date the developer has been processing the input tax from the contractor & associated professional fees into its residual input tax & reclaiming a portion (based on the partial exemption % mix) of the input tax, however this has been questioned lately within the office & challenged as to whether this is the correct approach. The challengers thoughts are that since Car Parking is a service & standard rated, that the development of the Car Park should also be standard rated & hence 100% of the input tax be reclaimable

Can I have your thoughts please.

Many Thanks in advance

[vatconsultant]

VAT rules provide that a supply of car parking, either by way of sale or rent, and whether of a garage or parking space, is standard rated. … The sale (or long lease) on new domestic property where the car parking is ancillary is zero rated.

[Author]

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