Brockenhurst College. VAT Opportunities for Education Providers
The European Court has made an unexpected decision in the long running Brockenhurst College VAT case.
The College provides training in catering and drama and operates and aims to give its students practical experience of dealing with the public. It therefore operates an occasional restaurant where meals can be brought that are prepared by students and charges for admission to drama performances.
Such charges are not uncommon and HMRC policy has been that such income is standard rated. The College disagreed and argued that the supplies of admission were closely related to their exempt supplies of education and therefore VAT exempt. The question has gone through the UK Courts and now up the European Court. Although the College was successful in the earlier stages the Advocate General for the European Court had issued an opinion that agreed with HMRC so it was expected that the College would lose. But the Court agreed with the College that the supplies of catering and admission were exempt. It found the activities were not a means of rating additional revenue but undertaken for educational reasons and were not in direct competition with commercial providers.
Many education providers have already made protective claims following Revenue and Customs Brief 39 issued in November 14. If you have not then consider a claim. However, it may not always be good news. I am aware of some educational establishments where the making of taxable supplies to the public has been very important to their VAT recovery as it has meant the VAT incurred on some expenditure is residual. As with all retrospective VAT claims be careful. If you would like to discuss whether the case impacts on you contact me
Whether in a few years, when the EU is but a memory, HMRC will change UK law to make it clear that such supplies are taxable is another question.
The judgment can be found here: Brockenhurst CJEU