In G4S Cash Solutions (UK) Ltd v HMRC [2016] TC05015 the First Tier Tribunal confirmed that parking fines incurred by the company could not be deductible for tax purposes.
G4S is a cash transportation company and its principal business activity is the secure delivery and collection of cash to and from customers’ premises and the replenishment of ATMs.
G4S incurs in the region of 10,000 parking fines each year, and deducts these costs when calculating its taxable profits.
HMRC raised discovery notices and closure notices for the four years ended 31 December 2010 for corporation tax of £580,000 on the basis that parking fines should not be deductible.
G4S argued that
- The fines were incurred wholly and exclusively for the purposes of the company’s trade.
- It was not possible to avoid the fines as drivers had to park close to the delivery points in order to ensure the safety of employees and the public, observe tight timeframes and reduce the risk of robbery.
- Although fines are not generally deductible there should be an exception for exceptional cases such as theirs.
- Procedures were in place to make sure that parking fines are avoided where possible and that no deduction is made where infringements occur unnecessarily.
The tribunal disagreed
- Since 2010 G4S had undertaken a retraining and reappraisal programme to reduce the number of fines incurred, and as a result had cut the number of fines by 50%.
- The FTT therefore did not agree that fines had been incurred unnecessarily for safety reasons.
- The company had reached agreements with some local authorities who granted dispensations over parking infringements and could have invested more resources to seek additional dispensations.
- Incurring the fines was a deliberate commercial and strategic decision by the company. Although breaching the law was as a result of activities in the course of the trade it was not part of the trade and the fines incurred could not be tax deductible.
Case reference: G4S Cash Solutions (UK) Limited v HMRC [2016] UKFTT TC05015
