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VAT education exemption case

A complex VAT case that examined the VAT liability of restaurant meals provided to the public, and charges for concerts and other performances organised by students as part of their further education courses at Brockenhurst College has almost reached a final conclusion. The events were offered as part of the students’ education and at a reduced price. The events were advertised to a limited database of people who had registered with the College and asked to receive newsletters informing them of such events.A decision of the First-Tier Tribunal (FTT) found in favour of the College and HMRC appealed to the Upper Tribunal (UT). The UT rejected HMRC’s arguments and agreed with the FTT that the supplies were closely related to the exempt supplies of education because they enabled students to enjoy better education. HMRC subsequently appealed to the Court of Appeal which made a referral to the European Court of justice (ECJ). The ECJ has now published a Judgment on this long running case which was first heard by the FTT in September 2012. The ECJ agreed with the arguments put forward by the College that the supplies made by the students were closely ‘related’ to the principal supply of education and accordingly should be exempt from VAT. This was with the proviso that the services were provided as an essential part of the students’ education and that their basic purpose was not to obtain additional income for the College in direct competition with those of commercial enterprises liable for VAT. The ECJ decision also stressed that it was clear that it did not appear the College was running these events to generate additional income.The case has now been referred back to the UK courts. HMRC is understood to be considering the judgement but has not commented any further. However, it is expected that many colleges with similar arrangements have made protective claims whilst this case was working its way through the appropriate legal channels and it is expected that many of these claims will be paid in the not too distant future.