G4S has failed in an attempt to avoid more than half a million pounds in tax by claiming parking fines were a business expense.
The security firm’s Cash Solutions subsidiary wanted to offset ‘unavoidable’ penalty charge notices (PCNs) against corporation tax.
However, a tax tribunal has ruled in favour of HM Revenue and Customs (HMRC), meaning G4S will have to pay an additional £580,000 in tax from 2007 to 2011 and, with assessments still outstanding for 2005 and 2006 as well as the past five years, the company’s final bill could well be in excess of £1m.
Jim Harra, director general of business tax at 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.”
G4S argued that it could not carry out its trade safely without contravening parking rules. The tribunal heard that the industry suffered about 1,000 attacks a year, while delivering or picking up cash, with some 65% involving G4S employees. There were also a further 2,600 aborted or suspicious incidents each year.
A G4S spokesman told Fleet News: “Transporting cash is inherently dangerous and our teams are regularly subject to criminal attacks. By parking closer to pick up destinations, we better protect our staff, customers and the public, but in so doing we regularly incur parking infringements.”
The tax tribunal heard that G4S incurred about 10,000 PCNs a year from 2008 to 2011. Contraventions included: stopping where prohibited on red route or clearway; stopping on a restricted bus lane; and parking with one or more wheels on or over a footpath or any part of a road. No details were given on how many tickets were successfully appealed.
While the company had negotiated dispensations with some local authorities, it did not have such arrangements with the 10 London boroughs and Transport for London (TfL), which accounted for 90% of the PCNs issued.
G4S argued that, despite its best efforts, it was effectively left with no other option but to park illegally.
Alastair Kendrick, director at MHA MacIntyre Hudson, said: “For an expense to be tax allowable it must be ‘wholly, exclusively and necessarily incurred’. It is the view of HMRC, and the tribunal, that this is not a ‘necessary’ expense.”
An excess charge, for example, could have been tax deductible, according to David Rawlings, director of BCF Wessex. But he said: “It’s not an excess parking charge, it’s a punishment.”
The tax tribunal’s decision had been swayed, in part, by G4S’s success in cutting the number of parking fines it was receiving in half. When PCNs reached a high of 16,700 in 2012, and spending on fines was predicted to hit £1.5m the following year, it formed a project team to tackle the problem.
It tracked which customers were being delivered to when PCNs were received and identified 200 penalty charge hotspot locations, where surveys were carried out to find alternative parking options. Driver training material was also updated to ensure that drivers understood how to comply with on-street restrictions.
In six months, it saved some £750,000. However, Judge Anne Scott said: “The fact that a 50% reduction was achieved within six months of the project makes it clear that PCNs had been incurred unnecessarily in previous years.”
She continued: “No doubt was viewed as being proportionate in the appellant’s strategic thinking, but it does not mean that for the lack of so doing the public, through their taxes, should share the burden of the cost of the PCNs.”
Scott also agreed with HMRC that there was a commercial motivation, rather than driver safety, for a number of fines being incurred, suggesting G4S was choosing to breach parking restrictions in order to “maximise profit”, a suggestion described by G4S as “outrageous”.