Supplies of Education - VAT Exempt or Not
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12th September 2014
VAT is a complex area for many
organisations, not least those that provide supplies of education
order to meet the criteria for exemption certain conditions must be met
being the correct ‘type’ of body to be able to make exempt education
and supplying the correct ‘type’ of services. In addition it is
goods and services that are not in fact a supply of education in their
right but are supplied in connection with education services to also
qualify for exemption.
The recent Upper Tier Tribunal
case for Brockenhurst College demonstrates that education providers can
VAT errors to their own cost. The case is also interesting as it
an increasing trend for the UK VAT tribunal system to find against HMRC
it is clear that the UK VAT law has been more narrowly constructed or
interpreted than the European VAT law that it is based on. It is likely
HMRC will lose appeals at both UK Tribunal and European Court of
where this can be demonstrated to occur.
The college had accounted for
VAT on its supplies of catering services to visitors to its restaurant.
lodged a claim for VAT over declared on the basis that the catering was
VAT exempt. The catering facility was manned by students of the college
meals were supplied for around 80% of the cost price of producing the
The first tier tribunal (“ftt”) found that
the catering and entertainment services were integral and essential to
supply of education and therefore qualified for VAT exemption. HMRC
sought to argue that the FTT were mistaken on the basis of HMRC’s view
supplies were not “closely related” to the principal supplies of
by the College as they were not “for the direct use” of those students
instead consumed by third party customers . The College however argued
there was no restriction in EU law on the identity of the recipient of
supplies in question. The students directly benefited from the supplies
allowed them to put into practice the skills that they had been taught)
thus the UK VAT law should not impose such a restriction.
The tribunal decided thatan
exemption is an exception to the ordinary rule and as such that an
should be construed strictly, but not restrictively. The exemption
accordingly, be construed so as to be consistent with its objective and
to ensure it retains its intended effect. To be closely related to a
exempt supply, the service in question must be an ancillary supply,
that is one
that does not constitute an end in itself, but is a means for better
the principal service supplied.
There was no requirement for the supply to
be made to the students receiving the supply of education services in
the supply to be classed as closely associated to the supply of
services made to the students. HMRC’s appeal was therefore dismissed.
About the Author
VAT People are leading VAT and Customs Duty
consultants based in the
North West of England. We work with a wide range of businesses
throughout the UK as well as assisting our accountancy colleagues to
unravel the thorny VAT issues for their clients. We are one of the UK's
largest and most comprehensive sources of VAT and Customs advice, our
consultancy team having over 140
years of experience in VAT and Customs
gained in either HMRC or a Big 4 accountancy practice environment.
Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.
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Article Published/Sorted/Amended on Scopulus 2014-10-01 09:03:26 in Tax Articles