HMRC has outlined its position following the decision of the Upper Tribunal in the Brockenhurst College case and before the awaited decision in the Court of Appeal.
The Brockenhurst College case concerned the VAT liability of restaurant meals provided to the public and charges for concerts and other performances put on by students as part of their further education courses. Brockenhurst College had viewed that supplies made from its restaurant, used for training chefs, restaurant managers and hospitality students were VAT-exempt supplies of education rather than standard rated catering, and that tickets for concerts and other live performances put on by students as part of their educational courses were similarly VAT-exempt.
HMRC disagreed with this position and with the decision of the first tier tribunal, which concluded that the supplies were VAT-exempt as being closely related to education. HMRC considered that the supplies were outside of the education exemption because the students were not the beneficiaries of the supplies in question, but only benefitted from making them, and consequently appealed to the Upper Tribunal.
The Upper Tribunal agreed with the decision of the First Tier Tribunal, holding that the supplies were closely related to the exempt supplies of education as they enabled the students to better enjoy education. The requirement in UK law for the supplies to be for the direct use of the student was met because they were of direct benefit to them.
HMRC further appealed to the Court of Appeal and a hearing is expected in February 2015.
In Revenue & Customs Brief 39/2014, HMRC has confirmed that it will not review its current policy on the VAT educational exemption until the Court of Appeal has delivered its judgment. HMRC’s position continues to be that such supplies are outside the scope of the educational exemption because they are enjoyed by third parties not in receipt of education.
However, in the meantime, HMRC will consider claims and make appropriate interim repayments based on the Upper Tribunal's decision where the circumstances are exactly the same as in Brockenhurst College. HMRC will not make repayments in other circumstances, such as where the supplies in question are linked to fully grant funded education. Claims will also be subject to an appropriate input tax restriction to recognise the additional exempt supplies and the usual four year time limit. Any repayments will be subject to protective assessments to cover the circumstance where the decision is reversed in the Court of Appeal, but assessments will not be enforced unless and until that eventuality occurs.
This will be relevant to further education colleges and other education providers which provide goods or services to the public in the course of education or vocational training undertaken by students. Therefore, if you make supplies of the same type and under the same circumstances as Brockenhurst College, you should now review your position and consider submitting a claim for VAT potentially overpaid, based on the decision of the Upper Tribunal.
If you would like to discuss further detail or would like assistance with making a claim, please contact our VAT team.