Purpose of this brief

This brief sets out the HM Revenue and Customs’ (HMRC) interim position following the decision of the Court of Appeal to grant leave to appeal against the UT’s decision. The 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.

Readership

Colleges of further education and other education providers which provide goods or services to the public in the course of education or vocational training undertaken by students.

Background and First Tier Tribunal’s (FTT) decision

Brockenhurst College challenged a decision rejecting voluntary disclosures for:

1. the supplies made from its restaurant, used for training chefs, restaurant managers and hospitality students. The claim was made on the basis that these were exempt supplies of education and not standard rated supplies of catering
2. the tickets for concerts and other live performances put on by students as part of their educational courses. These were similarly claimed to be exempt

The FTT concluded that the supplies in question were exempt as being closely linked to education because:

1. the College was an eligible body and so its principal supplies were exempt supplies of education
2. the supplies were integral and essential to those principal exempt supplies
3. the supplies were made at less than their cost
4. the supplies were not advertised to the general public. Instead, there was a database of local groups and individuals who might wish to attend the restaurant or performances
5. the supplies were not intended to create an additional source of income for the College

HMRC disagreed with the conclusion on the basis that the supplies were outside the education exemption because the students were not the beneficiaries of the supplies in question, but only benefitted from making them. HMRC appealed to the UT.

The UT’s decision and HMRC’s further appeal

The UT rejected HMRC’s argument and agreed with the FTT. It held that the supplies were closely related to the exempt supplies of education because they enabled the students to enjoy better education. The requirement in the domestic law for the supplies to be for the direct use of the student was met because they were of direct benefit to him.

HMRC has subsequently appealed to the Court of Appeal and the hearing is to take place from 16 to 17 February 2015.

HMRC policy and interim implementation of the Tribunal ruling

There is no change to HMRC’s policy that such supplies are outside the scope of the educational exemption because they are enjoyed by third parties not in receipt of education. This policy will not be reviewed until the Court of Appeal releases its judgment next year. In the meantime, HMRC will consider claims and make appropriate repayments based on the UT’s decision where the circumstances are exactly the same. (HMRC are not making repayments in other circumstances such as where the supplies in question are linked to fully grant funded education). These repayments will be subject to protective assessments to cover the eventuality that the decision may be reversed in the Court of Appeal. However, Assessments will not be enforced unless and until that eventuality occurs.

Claims and retrospective action

If you feel that you are entitled to a repayment based on the UT’s decision:

• you may wish to refer to Public Notice VAT 700/45 ‘How to correct VAT errors and make adjustments or claims’ which explains how to claim a refund
• your claim should be clearly identified as a “Claim Made Under the Upper Tribunal’s Decision in Brockenhurst College HMRC Brief 39/14”
• any claims will be subject to an appropriate input tax restriction to recognise the additional exempt supplies and the four year time limit in line with HMRC procedures

Further guidance

Public Notice 700/45 – How to correct VAT errors and make adjustments or claims.

Source: HMRC. www.hmrc.gov.uk. Copyright Acknowledged.