Posted by admin - March 14, 2014 2:35 pm Closely related to Education Ruling

Supplies closely related to education

Charges made for education by eligible providers are exempt from VAT. This exemption also extends to supplies they make that are ‘closely related to education’, such as school trips and catering for students.

The Brockenhurst College case

A further education college became involved in a dispute with HMRC over the VAT position of income it received from an onsite restaurant and ticket sales for shows performed in its theatre.

The training restaurant was operated entirely by students and their tutors and working in the restaurant and kitchens formed part of a number of vocational courses offered by the college.

Income was generated when the restaurant opened for specific events to provide meals to members of the public. The students planned, prepared and served the meals themselves, making all important decisions in the process. Meals were priced at 80% of cost, so no profit was made.

In a similar vein, students studying for qualifications in the dramatic arts were required to put on performances as part of the examination process for their A Level or NVQ qualifications. The college received income from tickets sold to the public

The Upper Tribunal has now supported an earlier decision of the first tier tribunal in a case brought by Brockenhurst College, agreeing that the ‘closely related’ definition can also apply to income received from third parties who pay to attend student events. This creates an opportunity for other education providers to ask HMRC for a refund of VAT they may have paid on similar income over the last four years.

HMRC has yet to comment on this latest decision, but the Upper Tribunal’s ruling has now set a precedent which HMRC could only overturn by taking the case further to the Court of Appeal.
However, it is also possible that HMRC might refuse to pay Brockenhurst College’s claim on unjust enrichment grounds.

Schools, colleges and academies should therefore review their current VAT treatment of such supplies.

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