The primary issue concerned claims for recovery of additional amounts of input tax over and above the amounts deducted under arrangements based on guidelines promulgated with the agreement of the commissioners by the Committee of Vice Chancellors and Principals (the CVCP Guidelines) from 1973 to 1994.

It was common ground that in the relevant period each appellant college had used a special method based on the CVCP Guidelines. Under that method, they reclaimed input tax in relation to three particular tunnelled areas of activity: outside conferences, separate catering and bar sales, referred to as the ‘three formulaic tunnels’. The tribunal observed that the word ‘tunnel’ may have been used to denote a path cut through the maze of the college's activity from the relevant input to the related output. In this way, the CVCP Guidelines provided a formula for input tax recovery which was used by the colleges. It had been decided in The University of Sussex No. 16,221; [2000] BVC 2,074 that the CVCP Guidelines did not properly give effect to the appellant's rights under the applicable European directive to the recovery of input tax. It was on the basis of that decision that the appellants in this appeal claimed additional repayments of input tax. The commissioners accepted that the colleges had a right to claim further input tax in relation to any taxable economic activities which were not embraced in the three formulaic tunnels, and in respect of which input tax had not otherwise been claimed. However, they supported the tentative view advanced in the tribunal's direction at the initial hearing that, in relation to the three formulaic tunnels, the method used provided full recovery of all input tax to which the college was entitled. At the second hearing the tribunal agreed to produce a decision in principle, setting out its views on three main issues. The first issue was whether the colleges’ taxable economic activities extended beyond the three formulaic tunnels. The second issue was in two parts: first, whether in relation to the three formulaic tunnels the CVCP method adopted by the colleges gave proper effect to their rights to the recovery of input tax under the relevant European directive; and secondly, whether the method encompassed the ability retrospectively to elect for apportionment based on actual percentages. The third issue, applicable if the method used in relation to the three formulaic tunnels or otherwise did not take care of residual overhead VAT, concerned the special method which was operated from 1973 to 1997 and raised the questions of what it provided for the recovery of residual VAT and which of the two methods proposed by the parties should be adopted to fill in gaps in the method. An additional issue was the jurisdiction of the tribunal in considering some of the matters.

The commissioners did not dispute that the appellants were entitled to claim further input tax. They maintained that the gaps apparent in the method should be filled in by applying the partial exemption standard method, since this was the only method for which the regulations provided in the absence of a directed or permitted special method. The appellants invited the tribunal to fill in the gaps in the method using what was referred to as the ‘Conference’ method. This provided for a fraction of the non- attributable input tax to be treated as deductible, the fraction being based on the portion of the year for which the college was available for conferences and the portion of the conference activity that was taxable. In the appellants’ view, use of the standard method did not produce a result which was fair and reasonable and did not give effect to the colleges’ European rights to deduct input tax.

The tribunal adjourned the taxpayers’ appeals.

1. Whilst the tribunal had jurisdiction to determine the amount of creditable VAT on the basis of the proper construction of a partial exemption special method, it could not treat the appeal as being against the method allowed or approved by the commissioners. A plethora of possible methods was in play and there was considerable doubt regarding the tribunal's jurisdiction to adjudicate between them.
2. Despite the fact that the arguments related to the principles of quantification of the appellants’ claims, the effect of the tribunal's decision was the determination of an amount of repayable tax. The matter was properly approached as an appeal under VATA 1994, s. 83(c), with respect to the amount of input tax which may be credited, because the issues related to the proper construction of the special method rather than to competing special methods.
3. In relation to the areas of activity within the three formulaic tunnels, the method used by the appellants and permitted by the commissioners: was consistent with the power given in the relevant directive to determine input tax entitlement; was in no need of further amplification; and, by a rough and ready formula, created for the appellants the European right which was determined and limited by that formula. Accordingly, no further input tax credit was due in respect of these areas of activity.
4. The appellants did engage in activities outside the formulaic tunnels and no input tax had been recovered in respect of all or many of those activities. The appellants were entitled under a special method to recover that tax. The tribunal suggested a method that could be construed to give a right to recovery consistent with the European directives.
5. The appeal was adjourned to enable the parties to agree the additional amounts of input tax deductible in respect of the non-formulaic tunnelled outputs.

No. 20,233