Off-street parking

The VAT treatment of off-street parking provided by four local authorities was in dispute. HMRC argued that the facilities should not be exempt since this would distort competition with similar non-exempt facilities provided by the private sector (Article 4.5 of the Sixth Directive). The VAT tribunal had ruled that competition would not be distorted and that the exemption should stand.

HMRC appealed. The High Court referred to the European Court of Justice for a preliminary ruling on the following questions:

• Should the expression 'distortions of competition' be ascertained by reference to the local area or the whole of the UK?
• What does the expression 'would lead to' mean?
• What is meant by the word 'significant'?

With regard to the first question the ECJ said that distortions had to be evaluated by reference to the activity in general rather than...