Can I claim parking fines as a business expenses?
In short, if you have received a parking fine or penalty by breaching the law, then no you can’t claim it as a business expenses.
A recent first tier tax tribunal case between HMRC and G4S cash solutions (UK) Limited has provided some clarity on the treatment of parking fines and whether they are an allowable business expense.
The Case – in short
G4S is a huge business that transports cash on behalf of its customers and also empties and restocks cash machines all over the country.
The parking fines were in relation to penalty charge notices received from local councils, incurred for contraventions including:
- loading/unloading in restricted areas
- stopping on red routes and bus stops
- parking over footpathes
For the period in question (2008 to 2010) they incurred roughly 10,000 penalty charge notices each year and were treating these costs as allowable business expenses for corporation tax.
Some of the key arguments that G4S used as to why they should be able to claim these parking fines were:
- They were incurred wholly and exclusively for the purposes of there trade
- They could not carry on their trade safely without incurring these costs (it was important for safety reasons that the vehicles were parked as closely as possible to the cash machine or client)
- As a general operational rule they try to ensure parking infringements are not incurred unless they have to be from a safety perspective
- They have procedures in place to ensure that no tax deduction is sought in circumstances where parking fines have been incurred un-necessarily
HMRC’s key responses to these arguments were:
- Parking penalty charge notice are statutory fines incurred due to a breach of the law
- It is an established principle that incurred due to a breach of the law are non-deductible in calculating profits for the purpose of corporation tax
- G4S had in recent years implemented a training and operations programme to help reduce the number of parking fines incurred, which had resulted in a 50% reduction in the number of penalty charges noticed being incurred – this suggested that the fines were avoidable.
The first tier tribunal found that although there was some merit to the argument that the fines were incurred as part of their business,however they concluded that the penalty charge notices were not an allowable expense for corporation tax because:
- they were not ‘wholly and exclusively’ for the purpose of the trade
- they were issued due to a breach in the law, which makes them not tax deductable
Commenting on the outcome, the general of business tax for HMRC said:
“We’ve always said fines incurred for breaking the law are not tax deductible. The tribunal has now established a clear precedent for rejecting any future such claims.”
So, what does this mean?
If you incur or have incurred a fine or penalty due to breaking the law, then this will not be an allowable business expense for your company. what has been left as somewhat a grey area is the tax treatment of fines issued by private organisations, for example if you are charged for overstaying in a private car park. As no law has been broken by doing this – it is purely a commercial agreement and is essential just an additional parking cost, then it would seem that this is not affected by this tax case and could still be treated as an allowable business expense as long as it is incurred as part of running the business.
However, be careful, if a company reimburses a director’s or employee’s personal parking fines (as opposed to fines issued directly to the company), HMRC would deem this to be earnings and treat it as a taxable benefit in kind which causes tax issues on the employee/director and an NI charge on the company.