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HM Revenue and Customs Brief 34/08


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Issued 24 July 2008

VAT – partial exemption – retrospective claims for input tax by higher education institutions (HEIs)

This Revenue & Customs brief article sets out HM Revenue & Customs (HMRC) policy on retrospective claims by Higher Education Institutions (HEIs) that operated a Partial Exemption (PE) method agreed under the Committee of Vice Chancellors & Principals (CVCP) guidelines. This article takes account of the Tribunal decision in the cases of Wadham College Oxford & Merton College Oxford [VTD 20233]. It uses a number of specialist terms that are fully explained in Public Notice 706, Partial Exemption.


Prior to 1997, when the CVCP guidelines were withdrawn, many HEIs chose to determine their recoverable input tax using a simplified partial exemption method described in the guidelines as the CVCP method. Recoverable input tax was calculated as a fixed percentage of the output tax payable on certain taxable supplies (known as tunnelled supplies). For some HEIs, the tunnels did not deal with all taxable supplies and these HEIs had the option to agree additional ‘tunnels’ for any other supplies, or, if they preferred, to agree their own special method instead.


In 2003, Wadham College Oxford & Merton College Oxford submitted retrospective claims for the period 1973 to 1994 on the basis that the CVCP method had not allowed them to fully recover the residual input tax they were entitled to on general overhead costs. We rejected the claims on the basis of the calculations made.

Tribunal decision

In hearing the appeal, the Tribunal considered two issues in detail:

  • whether the fixed percentages of the CVCP method gave credit for input tax incurred on general overheads used partly for tunnelled, taxable supplies
  • how to calculate any unclaimed input tax that related to additional taxable supplies not covered by the tunnels


On the first point, the Tribunal concluded that the CVCP method provided credit for all the input tax they were entitled to in respect of the tunnelled, taxable supplies: both directly attributable and general overhead costs. So, unless the HEI made additional taxable supplies, not covered by the tunnels, then no further claim was due. On the second point, the Tribunal rejected both the appellants’ proposed calculation and the method we put forward which included the values of all of the supplies of the HEI (including tunnelled supplies). The Tribunal invited both parties to reach agreement.

HMRC policy

We conclude that an HEI operating the CVCP method would only be entitled to claim further input tax if:

  • it made taxable supplies not covered by the tunnels in the CVCP method
  • there was no agreement as to how input tax on these taxable supplies would be recovered

Any entitlement to claim further input tax should be calculated using an appropriate methodology based on the use of the costs incurred.

Submitting claims

The House of Lords decision in Condé Nast and Fleming established that the three-year time limit contained in regulation 29(1A) of the VAT Regulations 1995 cannot be applied in relation to input tax incurred, but not yet deducted, in accounting periods ending before 1 May 1997. Claims in respect of those accounting periods may be made at any time until 31 March 2009 (see Revenue & Customs Brief 07/08 published on 20 February 2008 and Clause 116 of the Finance Bill 2008).

HEIs that operated a method based on the CVCP guidelines and who made taxable supplies not covered by the partial exemption method may now wish to make claims in line with this article and Budget Notice 78.

If HEIs are uncertain as to whether they have sufficient evidence to demonstrate that additional taxable supplies existed, they may wish to contact their local VAT office for assistance. Once it is established that they made taxable supplies not covered by the PE method, we will only accept claims based on reasonable estimations with supporting evidence.

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© Crown Copyright 2008.

A licence is need to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2008-07-27 12:48:31 in Tax Articles

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