VATGPB8665 - Other local authority activities: miscellaneous (A to E): congestion charging schemes
Local authorities may impose congestion charges to reduce traffic in city centres. Drivers who enter the zone have to pay a charge.
Charges generated from schemes operated by local authorities, or other public authorities, under public statute are outside the scope of VAT as the operation of a congestion charge zone is part of the local authority’s non business activity. However, if the scheme is run by a private operator it represents a business activity and so the charges are subject to VAT.
Some local authorities operating a congestion charging scheme may use an outside contractor to actually manage it. »Ê¹ÚÌåÓýapp contractor’s services are supplied to the local authority and they are standard rated. »Ê¹ÚÌåÓýapp local authority can recover the VAT charged under section 33 (see VATGPB4000).