Car Parking VAT, Partial Exemption

[PropertyDev]

Would appreciate some expert advice on VAT (Partial Exemption) please, for a brief description see below:-

A Property Developer, which is VAT registered as Partially Exempt, is refurbishing a Car Park on its estate - which is located behind several properties & serves the general public. The properties that are in the closest vicinity of the Car park are a mix of Commercial/Residential buildings & also a mix of Opted to tax properties/non opted to tax properties.

To date the developer has been processing the input tax from the contractor & associated professional fees into its residual input tax & reclaiming a portion (based on the partial exemption % mix) of the input tax, however this has been questioned lately within the office & challenged as to whether this is the correct approach. The challengers thoughts are that since Car Parking is a service & standard rated, that the development of the Car Park should also be standard rated & hence 100% of the input tax be reclaimable

Can I have your thoughts please.

Many Thanks in advance

[spidersong]

Are they making a taxable supply with the car park? Yes car parking is a standard rated service, but only where it's supplied for consideration in the course of business, but you haven't actually told us if they are supplying that service or if it's part of their other services, or even free.
e.g. are there meters there so that only those paying a standard rated charge can park, or is it that the car park is generally available for free to those who own the properties nearest, or even on a mixed pay/resident usage?

That is what you need to look at. Basically is there a direct and immediate link between the input tax and a wholly taxable supply? If yes it's recoverable, if no then it's either non-recoverable or residual depending on what supplies it's actually linked to.