A VAT update for FE colleges and universities

Universities may now be able to make reclaims for overpaid VAT in relation to income received from the operation of vocational training…

The case referred to below was widely reported earlier last year, with a Court of Appeal decision due early in 2015.  However we thought a reminder appropriate following HMRC’s publication of its brief earlier this week.

Following a widely reported tribunal decision earlier this year in the case of Brockenhurst College ([2014] UKUT 0046 (TCC)), which has opened up the possibility of colleges and universities being able to make reclaims for overpaid VAT in relation to income received from the operation of vocational training establishments such as on-site restaurants staffed by and used for the purposes of, training chefs, restaurant managers and hospitality students, HMRC have been granted leave to appeal the decision to the Court of Appeal. The hearing is scheduled to take place early next year.

The outcome of the Court of Appeal decision, and whether or not it upholds the decision of the Upper Tribunal, will have a potentially significant impact on a large number of FE colleges and universities and could lead to a welcome return of funds to the higher education sector.

Pending the Court of Appeal’s decision, HMRC have also now issued a brief (Revenue and Customs Brief 39(2014)) setting out their interim position.

Perhaps not unsurprisingly HMRC’s view is that the tribunal was incorrect to determine that the supplies of meals and concerts to the public as part of educational and vocational courses provided by Brockenhurst College were exempt, being closely related to the exempt supply of education by the College because of the educational benefit to the students in providing them, and continue to believe that such supplies are outside the scope of the educational exemption because they are enjoyed by third parties who are not in receipt of education (the students being the ones making the supplies rather than receiving them). 

HMRC have therefore advised that they will not make any immediate repayments save in circumstances which are “exactly the same” as those in relation to the Brockenhurst College decision but in the meantime, if you have not already done so, it is worth considering making a protective claim for overpaid input (for supplies made in up to the last four years) pending the outcome of the decision of the Court of Appeal.

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