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URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00118.html
Cite as: [2009] UKFTT 152 (TC), [2009] SFTD 445, [2010] STI 835

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Purple Parking Ltd & Anor v Revenue & Customs [2009] UKFTT 152 (TC) (08 July 2009)

[2009] UKFTT 152 (TC)

TC00118

Appeal numbers LON/2006/1580

LON/2006/1595

Value Added Tax - whether the provision of off-airport long-term parking facilities, coupled with the provision of "courtesy" buses is one supply or two - preliminary issue, preceding contention that the exclusion from the zero-rated transport category of airport bus services to long-term car parks is an illegal breach of the principle of "fiscal neutrality" - Appeal dismissed

FIRST-TIER TRIBUNAL

TAX CHAMBER

PURPLE PARKING LIMITED

AIRPARKS SERVICES LIMITED Appellants

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS (Value Added Tax) Respondents

TRIBUNAL: HOWARD M NOWLAN (Judge)

CYRIL R SHAW, FCA

Sitting in public in London on 11 and 12 May 2009

Paul Lasok QC, and Mario Angiolini, counsel, on behalf of both Appellants

Dr Ian Hutton, counsel, on behalf of the Respondents

© CROWN COPYRIGHT 2009

DECISION

Introduction

This case relates to the appropriate VAT treatment of the provision of "long-term" airport parking facilities. Both Appellants operate numerous such car parks, and because the car parks are generally about five miles from Terminal buildings, and invariably too far from those buildings for customers to walk to the Terminal buildings, both Appellants also operate regular bus services to and from the Terminals.

In 1984 a case was heard before the VAT and Duties Tribunal in relation to the appropriate treatment of very similar services provided at Gatwick Airport. This case, Courtlands Car Services Ltd. v. HM C&E (VTD 1778) decided that the Appellant in that case was providing two services, one of the provision of car parking, and one of transport. As the former was a standard-rated service, and the latter zero-rated, the decision had to deal with the further issue of how the single price charged should be split, and the decision was that the split should be based on the costs attributable to each service. This proved favourable to the Appellant in that, not surprisingly, most of the costs were attributable to the cost of providing and maintaining the buses, and paying the drivers. The outcome of this case presumably governed the treatment of all airport parking, or airport "park-and-ride" operations until 1995.

In 1995 a legislative change was made. Although the provision of transport "in a vehicle, ship or aircraft designed or adapted to carry not less than ten passengers" generally remained zero-rated, the provision of transport "in any motor vehicle between a car park or land adjacent thereto, and an airport passenger terminal or land adjacent thereto, by the person or a person connected with him, who supplies facilities for the parking of vehicles in that car park" was excluded from the category of zero-rated transport services. Prior to this change, 75% of the turnover of the first Appellant, Purple Parking Limited ("PPL") had been attributed to zero-rated transport, and 51% of the turnover of the second Appellant, Airparks Services Limited ("ASL") to such transport. Both Appellants accepted that the effect of the change was that all their services became standard-rated services and, until 2006, they accounted for VAT accordingly.

Whilst this point was not perceived to have any significance in relation to the two Appellants at the time, the European Court of Justice laid down in 1999, in the famous case of Card Protection Plan Limited v. Commissioners of C&E (Case C-349/96) [1999] STC 270, some new guide-lines for deciding when the provision of multiple services should be treated as the provision of two or more different categories of service, and when one service should be treated as the dominant one, with other ancillary services being taken to share the nature of the dominant one. Without venturing at this point into the complex issue of precisely when services should be treated as separate and distinct, or ancillary to a principal service, it is worth stating that:

• the broad effect of the case, and even more so of other domestic decisions that have followed the case, is that there has been a shift away from segregating multiple services into distinct services for VAT purposes, and a trend to treating ancillary and other economically-integrated services as taking their nature from the dominant service; though

• it is worth noting that this trend has not yet resulted in the analysis that, where local authorities and others provide "park-and-ride" services to reduce congestion in city and town centres, there is only one single service.

In 2006 both Appellants made voluntary disclosures, claiming that for the permissible three-year period prior to their disclosures, they had been wrongly treated for VAT purposes. They claimed that the 1995 VAT change had been invalid. This was because, although the UK had a dispensation to retain the treatment of transport as a category of zero-rated services, such dispensations were always required to be lawful. They contended that the refusal to zero-rate the transport services that they provided, whilst all others providing transport (for instance those providing conventional bus services to airports) were zero-rated, meant that the 1995 change breached the principle of fiscal neutrality.

HMRC rejected the voluntary disclosures made by the two Appellants on two grounds. First they contended that in the light of the changed approach following the Card Protection Plan case, the Appellants were providing only one standard-rated supply of parking services, with the ancillary, incidental or closely linked provision of transport. The Appellants contend that that is wrong and that they are either providing two separate services, or a single transport service. This Appeal would be resolved and dismissed were we to conclude that HMRC's argument to the effect that there was only one supply, and that that was of parking, was correct. Were we to conclude that there were two distinct services still, in other words that the Courtlands principle still applied notwithstanding the change of approach in Card Protection Plan, then the Appellants would still have to succeed on their "fiscal neutrality" argument, and were they to succeed on that they would then have to deal with the allocation question as between the provision of standard-rated parking and zero-rated transport.

The VAT and Duties Tribunal issued a Direction to the effect that there should first be a hearing on the preliminary question of whether the Appellants were providing one service of parking, with ancillary or intertwined transport, or whether there were two services, or possibly just one service of transport. That is the only issue before us.

Towards the end of the hearing, the Appellants produced various papers and a recent letter from HMRC dealing with the subject of city centre "park-and-ride" schemes. The treatment of such schemes is of course not a matter for us in this appeal, but the feature that the 1995 change applied only to airport park-and-ride services and not to such city centre services, and the feature that it appears still to be accepted by HMRC that those providing city centre schemes can, at least in some circumstances, demonstrate that two services (parking and transport) are being provided, does rather suggest that, for our decision to be cogent, we must look at the present issue in the slightly wider context. This, we consider, even extends to speculating as to the legislative purpose behind the change that was made in 1995. We consider that on one very likely basis the reason for the 1995 change is somewhat bound up with the issue that we actually have to decide as a preliminary issue. In this sense, we find it rather regrettable that we must confine our attention principally just to the preliminary issue.

Our decision on the preliminary issue is that the Appellants were only rendering one service, that of the provision of airport parking or airport park-and-ride services. The transport element can either be regarded as ancillary, or else the single service should simply be treated as one integrated service, and as not constituting a transport or any other form of zero-rated service.

The evidence

Evidence was given by Mark Hinge, Managing Director of PPL and by Stephen Hayes, Financial Controller of ASL. Very little of the evidence was contentious and indeed most of it was fairly obvious to any of the numerous people who will have parked a car in any airport car park. We will thus summarise it generally.

The various categories of airport parking

Both Appellants provide what is called "off-airport" parking, or "off-airport park-and-ride" services. There appeared to be four categories of airport parking that need to be distinguished, of which we are only concerned with one here.

The first category is the Short Term car parks, where the normal arrangement is that the customer parks his or her car in a bay, and then walks to the Terminal building. At Heathrow, many will know that this is charged by the hour, costs about £35 a day, and is thus attractive principally to business customers with short trips.

The next category is that of "on-airport Long Term parking". This, by definition, will be located somewhere on the property owned or leased by BAA or the other operator of the airport; it will be relatively close to the Terminal but definitely not close enough for customers to walk to the Terminal buildings; customers will park their cars in a numbered bay and retain their keys and the identification number of the bay, and then walk the short distance to one of the various bus stops. They will then get the large bus that will ferry them and their luggage to the Terminal building. Long Term car parks in this category are generally operated by the large PLCs such as NCP. It was not relevant to understand precisely how they operated, though we were told that these companies paid a large proportion of their revenues to the airport operator, and that their operations were more like a management function. From the perspective of customers, however, it sounds as if operations of this type were substantially similar (at least in their likely VAT attributes) to the third category, with which we were concerned.

The third, and the relevant, category involved the use of some land outside the perimeter of the airport itself as a car park, to which customers would drive their cars, and to and from which they would again be ferried by buses or mini-buses (with trailers to carry luggage) operated by the operator of the car park. The distinguishing features of this third category of car park from the on-airport Long Term car park was that customers would not park their cars themselves. They would leave them in an Arrivals area, and after attending to simple paper-work, get into the buses, and load their luggage either into the bus or into the trailer behind the mini-bus. Employees of one or other of the Appellant companies would then park the cars. In parking the cars, two points were relevant. The cars would be parked in various areas, geared to when the customers were expected to return. They would also be packed in somewhat more closely than in the bays that the customers used in the on-airport Long Term car parks. On the anticipated date of the customer's return, their car would then be moved to a Departure Area, so that when the customers returned, caught the return bus, or used the available phone to ring for a bus and returned to the car park, the car would be close at hand, in the Departure Area.

The fourth type of car park operation was one that was certainly offered by PPL, which they called "Meet and Greet". Under this, the customer's car was driven away from the Terminal building by a PPL employee, and then driven back when the customer returned. For VAT purposes, since the only service that was zero rated was that of carrying passengers in a vehicle designed or adapted to carry 10 or more passengers, this "Meet and Greet" operation was not in contention in the Appeal, since the entire service was doubtless standard rated.

The description of the parking areas

Considerable attention was given to the safety aspects of the car park sites by both Appellants. All sites were securely fenced; they were all covered by CCTV surveillance, and they were also patrolled. The police awarded some sort of "Safety-mark" to car parks that met certain standards, and it appears that all or most of the relevant car parks secured these awards.

As would be obvious to anyone, the car parks tended to be on land that was of little use for other purposes. Thus one of the particular car parks operated by PPL at Heathrow, was on land that had once been used as a gas works that was apparently unsuitable for most other uses except as a car park. This made the land ideal, in that it was acquired, or leased, more cheaply than other land. In the case of some of the car parks, they might be reasonably close to nearby villages or outlying areas of the town or city served by the airport. It was however more common for the car parks to be "in the middle of nowhere".

The journey times from the car parks to the Terminal buildings, and the regularity of the bus services

The distances between the car parks and Terminal buildings obviously varied. One car park, operated by ASL at Cardiff airport was sufficiently close that the bus ride was likely to take only 3 minutes, and it was said that it would theoretically be possible to have walked to the Terminal in 10 minutes. Most involved a somewhat longer bus ride, and it was accepted that in every case customers would inevitably only ever travel between the car parks and the Terminal buildings on one of the buses.

Customers could almost always expect some sort of bus service 24 hours a day. At most busy times, buses would depart at regular intervals. In the early hours of the morning, when business was quiet, there might be no regular bus service and a bus might have to be called for. Particularly with their return journeys, customers would often be given the phone number to ring for the bus, and told where the appropriate phone box was located, and then they would have to wait while the bus drove over from the car park to collect them. The frequency with which there were bus services was obviously judged carefully so that customers generally accepted that they had a sufficiently frequent and reliable service, but not so frequent a service that the costs would render the service unprofitable, or the required charges excessive.

The requirements for operating the buses

All of the buses used by both Appellants were designed to carry more than 10 passengers, and in order to operate these buses, various licences had to be obtained, and safety and maintenance procedures had to be followed. Drivers also operated in shifts. The buses suffered very hard use, and so were replaced frequently. In the case of one Appellant, and possibly both, the buses were generally replaced every two years. The various public service licences that had to be obtained were identical to those required by other conventional bus operators, and subject only to having routes approved, the Appellants could have used their buses on conventional bus routes. During the period relevant to the Appeal, neither Appellant had sought bus routes, and neither was ever carrying passengers other than car park passengers to and from Terminal Buildings. In 2009 however, ASL had sought and obtained permission to transport other passengers. The detail of this was not relevant to the VAT issues for the period of the Appeal, but we understood that only a fairly nominal charge of £1 was made to such "other" customers. We assume that most of the other customers would be those living near the airport, and working at the airport. Self-evidently they would only get on the bus after it had left the car park, and therefore only if there was available space in the bus at that point, and we assume that on return journeys again "other" passengers would generally only be able to travel if there was room on the bus after the core car park passengers had first taken their places on the bus.

Both Appellants had to pay an annual or other periodic fee to the airport operator for the licence actually to enter the airport Terminal areas for the purpose of dropping off, and re-collecting, passengers and luggage. This was either calculated as a fee per operating bus, or as a global fee.

The costs of the whole operation

As in the Courtlands case, and not surprisingly, both Appellants incurred a significant percentage of their costs in providing the transport aspect of the overall supply. In the case of PPL, approximately 80% of the costs were attributable to transport, and in the case of ASL, approximately 33%. The explanation of the different percentages between the two Appellants was largely accounted for by the fact that PPL ran a very large car park near Heathrow (presumably the one on the old gas works site) where the cost of the land was very low, but where a tunnel in the approach to the car park, and the feature that the car park was at the time servicing 4 (and now 5) terminals, meant that PPL were using relatively small mini-buses to service this large car park. It was more economic to use larger buses, where feasible, but this was simply not possible from the car park in question.

The basis of charging customers

Both Appellants operated an identical pricing structure for selling their services. Both charged entirely by the time that cars were parked in the car park. Charges were computed on a calendar day basis, so that if a car was left from 10 a.m. on Monday until 11 p.m. on Monday, that would count as one day, and if the car was only removed at 10 a.m. on Tuesday instead, that would count as two days. The level of charge was varied regularly since both Appellants kept a constant eye on competitors' pricing, and car park utilisation and other such factors. The daily charge rate was sometimes reduced after a given period, though for the first 14 days the charge was generally in the range of £8 a day. The aim was to try to under-cut the on-airport Long Term parking areas by about £1 to £2 a day.

Neither Appellant specifically charged for the transport. Obviously the costs of providing the transport were a major factor in pitching the overall pricing and, in this context, both Appellants needed to calculate the average number of days that customers parked their cars on their sites. We were told that for PPL the average was 11 days, and for ASL, 10 days. Presumably both were accounted for by the majority of customers using the car parks for either one-week or two-week holidays. The prices were thus fixed by aggregating all costs, assuming that each customer would park for the 10 or 11 days, then looking at predicted occupancy, rates charged by the competition, and the hoped for profit margin, and the daily charge would be fixed accordingly. With changes in occupancy levels, the charge would vary from season to season.

It followed from the fact that the charges were based entirely on the number of days that a car was in the car park, and that no charge was made as such for the use of the buses, that no regard was paid to whether a particular car arrived on site with just the driver or with a family of four or five with luggage. The charge was the same in both cases, assuming that both cars were parked for the same period. Taking the most extreme example, therefore, if one man parked his car during a three-week holiday, he would pay three times more than the amount that a team of four businessmen might pay if they parked one car from 7 a.m. until 10 p.m. for seven successive one-day trips on each day of one week. The single driver would thus have used the buses twice in three weeks, and the four businessmen would have together had approaching 60 journeys in the buses, though they would only have paid one third of the price paid by the single holiday-maker. This example is obviously an extreme one since it was relatively uncommon for the one-day business traveller to use the Appellants' car parks, but it nevertheless illustrates the way in which, even in an extreme case, the basis of charging of "per day, per car" remained unchanged.

The publicity material

We were shown a considerable amount of publicity material, including brochures and print outs from the Appellants' web-sites. Without venturing at this point into the ultimately critical issue of whether the Appellants' services were those of providing parking, or transport, or both, it is fair to say that the publicity material created the following impression. It focused principally on "Parking". The names of both Appellants contained the word "parking"; it was obvious that someone seeking their services would be wishing, first and foremost, to park a car whilst travelling from a nearby airport. Accordingly a considerable part of the brochures was dedicated to emphasising the safety of the parking, and the efficiency and simplicity of the parking operation. In other words, reference was made to "simply leaving your car, and moving yourself, your family and your luggage, into one of our courtesy buses, with the driver of the bus helping with the luggage". Not unsurprisingly, a very long list of search names that had been used in order to access the web-sites of the two Appellants invariably included the word "parking".

Reference was also made to the buses. This information said that there were frequent bus transfers to and from the Terminal buildings, and that those services were available 24 hours a day, unless for some reason that would have been completely irrelevant. It also emphasised, in one or other of two forms of wording that conveyed exactly the same meaning to both of us, that the buses were either "free", or that the buses were "courtesy buses". There was a considerable amount of debate between counsel and the two witnesses as to whether the buses were actually free. We regarded this as irrelevant in that what was obviously conveyed to customers was the clear and correct impression that their parking fee would pay both for the parking and the transport, but that no separate extra charge would be rendered for the transport, and that there would be therefore no relevance to how many passengers used the transport.

Adopting ourselves a "marketing" stance and somewhat anticipating the basis of, and reasons for, our decision, the publicity material reflected what we believe to be the reality of the service offered, and the likely approach of customers to that service. What the customer actually wants, first and foremost, is parking and economical parking. Thus price per day for the parking is a material factor, as well as the confidence that the parking is absolutely secure. Thereafter the bus transfer is essentially the "bad bit" of Long Term parking in that, cost apart, everyone would obviously prefer simply to walk through the covered walk-way to Heathrow's Terminal One from the adjacent Short-Term car park. Thus all that needs to be said about the transport is that the customer need not be too dismayed by the bad bit, because at least the transport is regular, reliable, clean, and it is free.

Methods of marketing, and standard terms and conditions

We were given various descriptions of the different ways in which each Appellant marketed its services. These included internet sales (which were of increased significance by 2009, as against the position in the period strictly covered by the Appeal (2003 to2006)); sales through various agents and other intermediaries, and very rare sales to people who simply drove up to the entrance gates. We were unable to discern much relevance to any of this information, save for the fact that customers were generally, at some point, able to see some "terms and conditions". We even failed to note anything of much relevance in any of the terms and conditions, save that for the rare customer who might have read any of this information, it gave a rather poor impression of the rather poor remedies that the customers might have if something went wrong. For instance it was regularly suggested that customers should arrive at the car park one hour before check-in time, and it then said that they could expect a bus transfer within some reasonable period (say 10 to 25 minutes). The bus journey itself should not generally take very long, say 15 minutes at the most. Customers were then sometimes told that if a bus failed to arrive for an hour, the customer (just the driver that is) would be given a £5 meal voucher to compensate for the late running of the bus, which in some cases one can only assume might have seemed rather inadequate compensation. It was also understandably said that the companies could not be liable for traffic delays, even those that led to customers missing their flights. We regarded all this information as being broadly irrelevant. It appeared that, in fact, the companies adopted a far more sensible and fair procedure where they had actually failed to deliver the required standard of service, and we saw no relevance to the VAT question that the terms and conditions themselves were, in several respects, not very reassuring.

There was even a suggestion by counsel for the Respondents that the terms and conditions barely gave the customer a legal right to transport at all. In response to this, counsel for the Appellants countered by pointing out that the oddly-worded terms barely conferred a right to park either. Whatever some rather strange documents might have said, we proceed on the obvious basis that customers contracting to receive the service from either Appellant did have contractual rights to have their car parked, and also rights that they and their passengers and luggage would be transported to Terminal buildings within some reasonable time period.

The survey

We mention finally that both Appellants had commissioned a survey. In this, passengers in some of the buses had been asked various questions as to why they had decided to use the services of the particular company. The feature that attracted the most "ticks" was "competitive pricing". "Parking" was not on the list however, and it soon became apparent to us that the survey had been commissioned to lend support to the question that was not in point before us, namely whether it was counter-competitive for "airport park-and-ride transport" to be excluded from the zero-rated category of transport. It rather struck us that the survey was not particularly illuminating in that context, and that it was completely irrelevant to the question that we had to answer, namely whether the services provided were of simply parking, parking and transport, or conceivably just transport. We consider that there is no point in indicating anything else about the survey, other than to have mentioned that most customers considered "competitive pricing" to be the factor that had led them to use the services of the particular Appellant.

Other "park-and-ride" services

We mentioned in the introduction that reference was made during the hearing by counsel for the Appellants to an HMRC publication on zero-rated transport that dealt with city centre "park-and-ride" arrangements, and also to a letter that mentioned that this whole matter was currently being reviewed by HMRC.

The significance of the general publication was that, by indicating that the transport element of such "park-and-ride" schemes would be zero rated, the publication either suggested that the argument being advanced by HMRC in this case, that the Appellants were only providing one service of parking, was either inconsistent with the approach still adopted in the case of city centre "park-and-ride" schemes, or else there must be some fundamental distinction between the two cases that needed to be identified. The essential point made by the letter was that, whilst the review was being conducted, local authorities could generally continue with their present arrangements, retaining all information as to why they considered that their present arrangement was valid. When the findings of the review were published, however, HMRC would expect all local authorities and others providing city centre "park-and-ride" schemes to ensure that their practices conformed with the new guidelines, or else they would have to appeal and sustain their particular approach on appeal.

The contentions of counsel for the respective parties

There was little dispute between the parties about the basic facts. Indeed most of the facts were obvious.

Both counsel took us helpfully through many of the relevant decided cases and contended that the cases supported their respective cases. The Appellants' case was essentially that both Appellants rendered two services, one of providing parking and one of providing transport. This case was said not to be covered by the reasoning in Card Protection Plan because that case mainly addressed the example of a dominant service, and "ancillary services that contributed to the better enjoyment of the principal service". In this case both separate services were absolutely vital, and the transport did not just lead to the better enjoyment of the parking. This case was also not covered by the principle underlying cases such as Levob Verzekeringen BV, OV Bank NV v. Staatssecretaris can Financien ("Levob")(Case c – 41/04) 2006] STC 766, College of Estate Management v. HMRC [2005] 1 WLR 3351, HMRC v. Weight Watchers (UK) Ltd [2008] STC 2313, and HMRC v. David Baxendale Limited [2009] STC 825. The principle to be extracted from those cases, according to counsel for the Appellants, was that if one separate element of supply was in fact subsumed into a wider description of the overall service, then it was that overall service that should be treated as encompassing the whole of the supply for VAT purposes. It was suggested that parking and transport were never covered by the over-arching type of service description that governed the outcome in the Levob case, and the three subsequent UK decisions just mentioned. We will expand on our understanding of the correct principles to be derived from these various cases in our decision.

Counsel for HMRC contended that we could decide this case in his favour on one or other of two grounds. One was to say that the transport element was indeed ancillary to the basic parking service, and thus essentially covered by the reasoning in Card Protection Plan. The other approach involved giving a slightly different rationalisation to the Levob case and the other three just mentioned. Under counsel for HMRC's approach, we should consider the supply or supplies from the point of view of the consumer and first ask whether, from that perspective, there was really only one basic economic supply. If there was and it would be artificial to split it because both elements were utterly integrated, then we should treat there as being a single supply and if that supply did not fall within the category of transport, it would be standard rated.

We might just mention for completeness two points about the third possible approach, namely that counsel for the Appellants might have suggested that there was only one supply and that that was of transport. Counsel for the Appellants did not particularly advance this case, and we indicated that we thought that it would not have been promising to do so. Counsel also pointed out correctly that even if that case had been advanced, and indeed accepted, the outcome would still have been that there should be dissected from, and removed from, the reserved category of the zero-rated service, the parking element. This was because under the decision in Talacre Beach, the reserved category of zero-rated services should be construed strictly, and not extended, even within something that ranked as one single supply, beyond the element of that supply that was properly zero rated. We consider that this assumption was correct even though, in the Talacre Beach case, the excluded element was something that was very specifically excluded from the zero-rated category, rather than an element that, viewed on its own, would be standard rated, such as parking.

Our decision

There was some argument, to which we have already referred, to the effect that the contract in this case barely even provided for the provision of transport. Whilst we note this point insofar as it indicates the more significant element of the supply, we have already said that we accept that in a legal sense, the Appellants were contractually liable to provide to their customers both parking and transport. That simply means that this case is within the difficult category where legally speaking there are separate supplies, and where we must decide whether for VAT purposes there is in reality only one single economic supply.

The relevant authorities

We accept that the approach to single and multiple supply questions has been changed since the decision in Card Protection Plan and that, therefore, the Courtlands case is of no assistance to us. The decision in that case that there were two separate supplies was not explained. Prior to Card Protection Plan it may have seemed to be too obvious a point to need expansion and explanation, but it still follows that there is no reasoning in the case that assists us here.

We must commence our consideration, post Card Protection Plan, by quoting paragraphs 26 to 32 of the Court's decision.

"26. By its first two questions, which should be taken together, the national court essentially asks, with reference to a plan such as that offered by CPP to its customers, what the appropriate criteria are for deciding, for VAT purposes, whether a transaction which comprises several elements is to be regarded as a single supply or as two or more distinct supplies to be assessed separately.

27. It must be borne in mind that the question of the extent of a transaction is of particular importance for VAT purposes, both for identifying the place where the services are provided and for applying the rate of tax or, as in the present case, the exemption provisions in the Sixth Directive. In addition, having regard to the diversity of commercial operations, it is not possible to give exhaustive guidance on how to approach the problem correctly in all cases.

28. However, as the Court held in Case C-231/94 Faaborg-Gelting Linien v. Finazamt Flensburg [1996] ECR 1-2395, paragraphs 12 to 14, concerning the classification of restaurant transactions, where the transaction in question comprises a bundle of features and acts, regard must first be had to all the circumstances in which that transaction takes place.

29. In this respect, taking into account, first, that it follows from Article 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, second, that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the function of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service.

30. There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary services, which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied (Joined Cases C-308-96 and C-94/97 Commissioners of C&E v. Madgett and Baldwin [19998] ECR 1-0000, paragraph 24.

31. In those circumstances, the fact that a single price is charged is not decisive. Admittedly, if the service provided to customers consists of several elements for a single price, the single price may suggest that there is a single service. However, notwithstanding the single price, if circumstances such as those described in paragraphs 7 to 10 above indicted that the customers intended to purchase two distinct services, namely an insurance supply and a card registration service, then it would be necessary to identify the part of the single price which related to the insurance supply, which would remain exempt in any event. The simplest possible method of calculation or assessment should be used for this (see, to that effect, Madgett and Baldwin, paragraphs 45 and 46)

32. The answer to the first two questions must therefore be that it is for the national court to determine, in the light of the above criteria, whether transactions such as those performed by CPP are to be regarded for VAT purposes as comprising two independent supplies, namely an exempt insurance supply and a taxable card registration service, or whether one of those two supplies is the principal supply to which the other is ancillary, so that it receives the same tax treatment as the principal supply."

Beyond endorsing the remark at the end of paragraph 27 of Card Protection Plan that guidance that is appropriate in one case may not fit particularly appropriately (just as a matter of being entirely aptly worded) in other circumstances, and accepting the obvious direction in paragraph 28 that we must "look at all the circumstances", nothing in paragraphs 26 to 28 needs further comment..

Paragraph 29 is crucial, albeit that, at first reading, it almost appears to give two inconsistent directions. Self-evidently in a case where the second direction applies, however, it must take precedence over the first. Thus the direction to us is to identify whether, from the perspective of the typical customer, the supplier is supplying a single service or several distinct principal services, and in addressing this question and in considering this we should view the service or services "from an economic point of view". We should also refrain from splitting services, "so as not to distort the functioning of the VAT system".

Paragraph 30 then gives us an example of a single service, being the case where one service is the principal service, and the other or others are ancillary, meaning that the other services do not constitute, for customers, an aim in themselves, but rather a means of better enjoying the principal service.

Madgett and Baldwin was the case of the Devon hotelier who offered guests one of two packages, one being just hotel services, the other being hotel services for six days, coupled with coach transport from, and back to, the North of England, plus a coach excursion during the middle of the stay in the same coach. The inference to be drawn from this case is that if a hotel had provided a hotel bus to run guests to and from the nearby station, or to and from the beach or "the front", those transport services would have been ancillary. For such services will commonly be offered by hoteliers, and are a mere adjunct of the principal supply. Transport to and from the other end of the country was, however, something utterly different. Thus when customers took up the double package, and of course paid more than merely for accommodation, they were receiving two services.

Paragraph 31 of Card Protection Plan is also significant in that it tells us that single or split pricing is not necessarily decisive, either way, but that the basis of pricing may be of significance. We consider that the whole aspect of pricing is of great significance in this case.

Before trying to apply these directions in Card Protection Plan to the circumstances of this case, we should make three preliminary observations. First we regard paragraph 29 as containing the key requirement, and, as has been indicated in several later cases, we treat paragraph 30 as merely offering one example of the type of case where several services are to be treated, from the customer's perspective, as constituting one basic economic supply.

Our other two observations refer to the difficulties of trying to follow these directions. First it is not entirely clear how one identifies whether and when "there is one service from an economic point of view". Secondly we find it quite difficult to apply the general words about "ancillary services", and "services that the customer does not regard as an aim in themselves, but as contributing to the better enjoyment of the principal service" to the very facts of the Card Protection Plan case itself. In Card Protection Plan, customers had the benefit of insurance against the misuse of their credit cards if they were lost, but a condition of this was that they provided all details of their cards in advance, and then informed CPC of the loss of cards within 24 hours of loss, so that CPC could perform its simple obligation of notifying the card companies of the loss. Since there would then almost always have been no liability for card withdrawals, it rather seems that the main card registration service came closer to rendering the insurance element irrelevant, rather than being ancillary to it. It is certainly difficult to see that the registration service was merely "a means of better enjoying the principal insurance service supplied".

Several later cases have propounded a slightly different test from that of the principal supply, and ancillary supply serving to promote the better enjoyment of the principal supply. All of the cases, other than Card Protection Plan that we referred to in paragraph 35 above, had an element of a common theme to them, and indeed a theme that is not quite so clearly evident in this case. The common theme was the respect in which there was an umbrella or overall description to the service provided, notwithstanding that the service was delivered by supplying individual related elements. Thus in Levob there was a supply of the service of providing "useable, customised software", even though there was a supply of goods in the shape of standard software on CDs or some other form of hardware, coupled with major customisation services. The overall description "encompassed" the two elements. Similarly in College of Estate Management there was a supply of education, leading to a qualification, even though, within that, there were individual supplies of books and pamphlets and some direct tuition. In Weight Watchers, the over-arching supply was of a weight-loss programme, even though that was delivered by providing written materials, and customer sessions. And in Baxendale, there was a provision again of a weight-loss programme, albeit that that was delivered by providing special food packs (for which alone a charge was made) and support services.

Although on the contentions of counsel for the Appellants, the requirement of this line of authority was that the "ingredient services", so to speak, should all be encompassed in some over-arching description of service, we agree with counsel for HMRC that it is right to give a broader rationalisation to these cases.

We consider that the headnote in Baxendale provides a very good summary of the basis of Mr. Justice Morgan's decision. This provides a rather wider test for treating there as being one integrated service. It read:-

"There was a single supply where two or more elements or acts supplied by the taxable person to the customer, being a typical consumer, were so closely linked that they formed, objectively, a single, indivisible economic supply, which it would be artificial to split. The transactions should be looked at from the view-point of the typical consumer and the extent of the linkage between the relevant transactions should be considered from an enonomic point of view. The question then was whether it would be artificial to split them into separate supplies. Applying that test to the facts, it was artificial to split the transaction into the separate elements of a supply of food packs and a supply of support services. What the typical customer was buying was the combination of food packs and support services; the two elements reinforced each other. From an economic view, it did not make sense for the supplier to charge, or for the customer to pay, separately for the elements of food packs and support services. Thus, the tribunal was wrong in law in holding that there were two separate supplies. The transaction involved a single supply. On the facts, the support services were not subservient or subordinate or ministering to the food packs; the supply of support services was not ancillary to the supply of food packs. The supply was a single composite supply of two non-ancillary elements. The character of that supply was a supply of services, which was standard-rated, not a supply of food, which was zero-rated. The Revenue's appeal would, accordingly, be allowed and the taxpayer company's cross-appeal dismissed."

We consider that this approach justifies the slightly broader explanation and ratio that counsel for HMRC contended emerged from the more recent cases.

The application of the law to the facts in this case

The clear starting point for us is to decide whether, from the perspective of the typical customer, there was one economic service or two. This addresses the question posed at paragraph 29 of the decision in Card Protection Plan, and the question posed by the authority just quoted. Viewing matters in this way, the question for us is whether, looking at the supply or supplies from the perspective of the typical consumer, there was one service, and if there was, whether it would be artificial from an economic point of view to split the supplies into two.

We consider that whether we describe the service as one of providing "long-term parking", or offering a "park-and-ride" service, it is realistic to say that, from an economic point of view, there is one single service. Those very descriptions, which are both commonly used terms to describe the overall service offered, both indicate that the service is integrated. From the perspective of customers, they want both elements of the service, or it may be more accurate (from the perspective of customers' basic aims) to say that customers want parking, and if they have parking some distance from the airport, then they must regrettably also have the transport element.

The two elements of the park-and-ride service were, in fact, more integrated than the equivalent elements in every case referred to in paragraph 35 above. It would have been absolutely impossible to use the parking element of the service, without also using the courtesy bus. Anyone who had not parked their car in the car park would not be in the car park to think of using the bus to travel to the airport, and anyone at the airport without a car in some car park in the middle of nowhere, would have no occasion to obtain transport to the car park. One has to suppose that there would also be very good policy reasons why, for security purposes, such transport would positively be refused.

Parking was also clearly the dominant aspect of the service. The features that the parking was long-term parking, and that it was secure parking with fencing, CCTV and patrols at night, all focus attention on the critical nature of the overall service as parking. If one were to ask people who visited the web-sites of the two Appellants what service they were hoping to obtain, they would unquestionably say that they were trying to arrange for long-term parking whilst they were away on holiday or on some trip. If one asked customers, even when alighting at Heathrow from one of the buses operated by either Appellant what service they had obtained from the relevant Appellant, they would say that they had used the Appellant to provide long-term parking. If one asked passengers on an aircraft how they had travelled to Heathrow, the answers would vary between "via the Heathrow Express", "via the Piccadilly Line tube", "dropped-off by a friend", or "I drove by car". It seems singularly unlikely that anybody would say, "I drove by car and then I got in a courtesy bus".

We accept that any customer of the Appellants who had a long wait for a bus to the airport, and one left in the rain looking at the headboards of wrong buses, whilst waiting for a return trip in the bus operated by either Appellant, might well say that they had a very firm and clear aim that one of the buses should arrive promptly and take them in the desired direction. We must however pay attention to the aims that are "aims in themselves". We obviously accept that it is financially impossible for holiday-makers to park their cars in the Short-Term Heathrow car park and thereby avoid the need to use a courtesy bus at all. It is nevertheless realistic to say that a driver and his family approaching Heathrow drives towards the Long-Term car parks with the dominant aim of parking his car. He almost certainly regards the ride in the courtesy bus as a necessary evil, and something that he must endure in order to obtain economic parking during a 14-day holiday. And the various virtues of the bus, namely that it is hopefully available quickly, that the journey is short and that it is clean merely diminish the regrettable feature that parking at some distance from Heathrow involves the slight (or occasionally, great) inconvenience of being dependent on the courtesy bus.

If we pay regard to the method of pricing, it is clear that only one price is charged for the composite service; that is measured and geared entirely by reference to the time that a car is in the car park, with the bus invariably being referred to as a "free" bus or a "courtesy" bus. Nothing in our view hinges on the entirely far-fetched issue of whether any customer supposes for an instant that the bus is "free" in the sense that the supplier suddenly decides, out of its own free resources, to give the customer a genuinely free present. Everyone knows that "free" simply means that the supplier incurs numerous costs in delivering the courtesy bus service, but that no separate charge is made for it.

Is the feature that the charge is geared entirely by reference to the time that cars are parked in the car park just an accident that we should ignore, or is it something that is fundamental and obvious, having regard to the reality of the overall circumstances? It seems to us that any other basis of charging would either be complicated and a great disincentive to the use of the service, or just plainly unworkable. The least ludicrous alternative would presumably be to charge largely by reference to the time that cars were in the car park, and then to charge a fairly modest amount, per person, for the courtesy bus. That would of course preserve the oddity that the bus, priced in isolation, would still generally be being operated at a loss, but it would also be very unappealing. It would greatly add to complication for the separate charging to be levied either by the bus driver, or by providing tickets that the bus driver would have to check. More significantly it would undermine the feature that we assume to be absolutely critical, namely that intending users of the service could tell at an instant whether the charges of one of the Appellants did or did not under-cut the charges rendered for on-airport Long Term parking and for the Short Term car park. The choice of whether to charge per passenger or per "car load" would also be difficult. On the reasoning that buses would often move when customers had boarded them, and that if there were available seats it would cost no more to transport the family than to transport the driver, there might be a temptation to charge just once, per family, and not lose families as potential customers. But that then renders the whole notion of charging separately for transport to be a pointless complication.

It would be even less feasible for the Appellants to charge for the composite service solely by charging for the transport. Whether this was done "per passenger" or "per car load", the result would be unworkable. The factor that governs the upper ceiling to the gross turnover of the two Appellants is available space in their car parks. Thus if charges were levied solely by reference to the transport, and assume that a mean average charge meant that every driver had to pay on average £50 for his own and his family's transport to, and a further £50 for transport back from the airport (these figures mirroring the fact that on the average actual "stay", the average customer pays £100 for parking), the result would be totally unworkable. No one using the car park for 7 days, or for 4 days, would use it. The car park might conceivably be full of people who were away for three weeks or more, but then the pricing would have been undermined.

We conclude that the actual basis of charging is the only realistic one. All the Long-Term car parks charge on this same basis, and provide "courtesy buses" (that expression being the one generally used) and we consider that this points to the fact that it is realistic to treat "parking" as the fundamental service. In other words it is not just pragmatic considerations, remote from the real significance of the parking aspect, that make it necessary to charge entirely on the "per car, per day" basis. This reflects the fact that with Long-Term parking, it is entirely realistic that the customer pays by reference to the length of the time for which he parks his car. We are aware that, at Heathrow, Hopper buses collect people from nearby hotels, and that passengers have to pay for these buses, but that situation is quite different. A modest charge is simply being made for transport in isolation, and this is not geared to the pricing of Long-Term parking, or park-and-ride services.

We now turn to the point made in paragraph 29 of Card Protection Plan, where reference is made to the feature of "avoiding artificially splitting services", in order to avoid "distorting the functioning of the VAT system". It may be that we should simply concentrate on the former point of avoiding artificial splitting of services, but we do think that it is worth just paying some regard to the underlying purpose that the ECJ had in mind, namely the avoidance of distorting the functioning of the VAT system.

It would obviously be more complicated to have to allocate single charges between parking and transport in this case. In a sense it would also be undesirable as well as complicated. If the split was geared to cost, this would result in a greater impost of VAT on PPL than on ASL and would this be desirable or fair? And would it also be somewhat undesirable, if we are right to say that the basic service being sold is of parking, that different car park operators would be charged in different ways? The Short-Term Car Park operator would obviously just be rendering a single standard rated service, and it also seems reasonable to suppose that the operators of on-airport Long-Term parking services are accounting for VAT in relation to their total turnover. Maybe the latter would change if the Appellants won all aspects of this appeal, but it still seems undesirable when in reality the competition is between Parking and Parking that there might be VAT distinctions drawn, were we to divide the services in this case. We thus conclude that refraining from splitting the services in this case achieves both of the points addressed in paragraph 60 above, and we consider that this is significant.

We turn now to the issue of whether we decide this case on the basis of the Card Protection Plan test of "principal service and ancillary service, not constituting an aim in itself, but fostering the better enjoyment of the principal service", or whether we decide it more in line with the "single economic service" test and the guidelines in the later cases.

We agree with counsel for the Respondents that either basis seems appropriate to us. We decide that the realistic description of the overall service was that of "parking" or "park-and-ride", and that, from the perspective of the customer, parking is the dominant element. It may seem strange to treat the transport, which is vital, as merely fostering the better enjoyment of the parking. A more apt summary is to say that the transport is required to facilitate the use of the parking at all, but we certainly consider that customers do not have transport in mind as "an aim in itself". Once they opt to use the parking, then they are going to have to use the courtesy transport. The transport is an aim forced onto them by having to park in an unappealing location, some distance from the airport. As an aim in itself, they are not trying to locate a transport service. They want parking, and the less delays and inconvenience involved with the transport, the better. Tests laid down in any case have to be adapted appropriately to the circumstances of other cases, and we consider that even within paragraph 30 of Card Protection Plan, it is perfectly appropriate to say here that the principal supply was of parking, and that the transport was ancillary. Indeed, in some respects, we consider that the generalisation in paragraph 30 fits the facts of this case as aptly as it fitted those in Card Protection Plan itself.

We consider that the same decision is all the more clearly based on the "single economic supply" notion that has run through the other cases mentioned in paragraph 35 above. Having already quoted one headnote, we consider that there is again an excellent headnote in the Weight Watchers case that admirably reflects the words and reasoning of the decision, and the judgment of Sir Andrew Morritt which was the judgment of all members of the Court of Appeal. It reads:

"The test to be applied in deciding whether a transaction consisted for VAT purposes of a single or multiple supply was whether two or more elements or acts supplied by a taxable person to the customer, being a typical consumer, were so closely linked that they formed, objectively, a single, indivisible economic supply which it would be artificial to split. In applying this test, regard had to be had to all the circumstances of the transactions. The transactions had to be looked at objectively from the perspective of the typical customer, and the extent of the linkage between the relevant transactions had to be considered from an economic point of view. The question then was whether it would be artificial to split the transactions into separate supplies. Whilst the fact that the supplier had charged a single price for the aggregate of the transactions was a relevant consideration, it was not conclusive. In the instant case, the typical consumer was or was about to become a member of the taxpayer's programme; the purpose of such a consumer in being or becoming a member was to obtain the benefit of the weight-loss programme marketed by the taxpayer; one of the cardinal features of that programme for a member entitled to attend meetings was the reinforcing combination of diets as taught in the handbook and the group therapy to be derived from the meetings; if it was the combination which the member was buying, then it made no sense from an economic point of view to pay separately for the meetings and the publications; there was no difference between one meeting and another. It followed that the events of the first meeting, from the point of view of the enrolling member, were merely a necessary preliminary to obtaining the benefits of the programme as a whole at that and any subsequent meeting which the member attended. The services and printed matter supplied were so closely linked that it would be artificial to separate them: there was a single supply of a standard-rated weight loss programme at the meetings (initial and subsequent)"

We consider that this case falls squarely within those tests. The two limbs of the present service were inseparably linked: the dominant service was unquestionably not that of transport; whether it was "parking" or "park-and-ride", it was one service and it was not transport. The pricing in this case was utterly fundamental. It charged solely by reference to parking and that was no accident. Nothing else would have been feasible or realistic. It is also fair and appropriate for variations on a parking service at airports to operate on a level playing field, and we consider that it would indeed both complicate matters, and distort competition to split the services here between a standard-rated and a zero-rated element. Parking should compete with parking, and in that context we consider long-term airport park-and-ride fundamentally to be parking.

We accordingly dismiss both appeals.

We consider that it is appropriate, however, to address two other matters shortly. The first is the whole contention that the Appellants would have had to advance had we allowed this Appeal, and which they would still have to advance were they to appeal against this decision, and were our decision to be over-turned on appeal. The second is whether we should reconsider our decision in this case in the light of the general treatment accorded to "city centre park-and-ride" schemes.

There are two comments that we wish to make on the proposed contention that the 1995 deletion from the zero-rated classification of transport of the transport element of airport park-and-ride services was unlawful, as breaching the principle of fiscal neutrality. Both reasons are related, and the second has a bearing on the comments that we will make on city-centre schemes.

We first reject the argument that was advanced to the effect that the modification in 1995 to the zero-rated classification of transport effectively conceded that airport park-and-ride services constituted two separate services. We were asked by counsel for the Appellants: "Why else did the transport element of airport parking have to be excluded from zero-rated status?" The clear answer to this is that the 1995 change was made before the decision in Card Protection Plan, and the decisions in the later cases. Those cases have changed the approach to the whole "one economic service/two distinct services" issue.

Our second observation in relation to the "fiscal neutrality" argument is linked to the basis of our decision on the preliminary issue that we have had to consider, and to the reasoning that seems to us to have been likely to have led to the 1995 exclusion of airport park-and-ride transport from the transport category of zero-rated services. The basis of our decision on the preliminary issue all reflects what we see to be the reality, namely that all long-term airport parking, and airport park-and-ride is fundamentally to be treated as parking. It would in fact be much closer to breaching fiscal neutrality therefore for short-term parking to be standard-rated, and for other competing parking to be partially or largely zero-rated. This we suspect might well be why the 1995 change was inserted into the legislation. And by contrast the notion of saying that unfair competition is discernable between airport park-and-ride treatment, and the slightly far-fetched notion of a car driver parking in Reigate or Redhill and taking the local train, or the public bus, to Gatwick is far-fetched. We accept that it is not our present concern to address the wider issues or to consider further why the 1995 change was made, but these considerations do seem to tie in with the basic reasoning, underlying our approach to the preliminary issue.

City centre park-and-ride schemes

There are obvious similarities between airport and city centre park-and-ride schemes. They both provide parking and they both provide and have to provide transport.

We have been given no information about city schemes but happen to know that the Oxford scheme on the A40 approach road requires modest separate payment for a perfectly ordinary (i.e. not fenced and secure) car park, and those using the car park then have a choice of conventional Oxford buses going to slightly different locations, in which each person travelling pays the fare for transport. The buses doubtless operate only, or mainly, during shopping or office hours, and we suspect that a car park barrier blocks access during the night. We assume that the car parks are virtually deserted at night, and we also fear that cars left over-night might well be vandalised, even perhaps on the outskirts of Oxford.

There are thus in fact many distinctions. The long-term secure parking aspect is largely irrelevant. It is that that focuses much of the attention on parking being the dominant element of airport park-and-ride services. The long-term nature of the parking, and the expectation that cars will be parked on average for 10 or 11 days utterly governs the basis of customers being charged always and solely on a "per day/per car" basis. By contrast, in the city centre park-and-ride service, certainly where the customers pay reasonable amounts for a day's unsupervised parking, and they pay separately for their bus journeys, the case for saying that there are two services is entirely coherent. Putting it the other way round, the proposition that the decision in this case, if right, would inherently mean that, however priced, all city centre park-and-ride services should be treated for VAT purposes as we have decided is appropriate for such airport services in this case, is completely unrealistic.

It is certainly not for us to venture into the review, apparently being conducted at present, in relation to urban schemes, but we do however conclude that:

• there are very material distinctions between city centre and airport schemes;

• airport schemes place, through their long-term and secure nature, and through the essence of their pricing, a far greater significance on parking being the essential feature of the service, and

• without venturing into the different possible pricing approaches to city centre schemes, we find it entirely credible that one operator could separately supply both parking and transport in such cases, without their being any inconsistency with our decision here that airport park-and-ride services are fundamentally one service.

Costs

This case was initially listed before the VAT and Duties Tribunal, with the consequence that being a "transitional" case, on the transfer of the functions of that Tribunal to the First-Tier Tribunal, Tax Chamber, we have a discretion to deal with costs, as we have been requested to do by HMRC in the event of their winning this appeal, in accordance with the rules that prevailed in the earlier Tribunal. This means that in the event that the various conditions of importance, complexity and difficulty set out in the Parliamentary statement are satisfied, we can award costs in favour of HMRC. We have been asked to exercise this discretion, to conclude that the tests in the statement are satisfied, and to award HMRC their reasonable costs, which we now do.

HOWARD M NOWLAN

TRIBUNAL JUDGE

RELEASE DATE: 8 July 2009