VAT News

Q - When is a Meal not a catering supply? A - when it’s Education


New HMRC Guidance for Exemption of Goods & Services closely related to a supply of education has been issued following the VAT case taken by Brockenhurst College.

This is a long running saga on the VAT liability of income for the college generated when students learn by doing through such activities as catering, hospitality or performing arts. As reported the courts concluded that the supplies of catering were in the college’s case VAT Exempt activities as they were closely related to exempt supplies of education being made to that student.

The guidance note in HMRC’s Internal Manual maintains a very specific application of the judgement and lists three main criteria that they will be considering where other taxpayers seek to apply the same treatment on the income. Those are:

There are three main criteria that HMRC state must be satisfied – as extracted from their note: “

  1. The education in question must be being provided by way of business.

Most further education is fully grant funded, and as such is regarded as a non-business activity. If a Further Education College has claims which relate to both grant-funded education and exempt education for fees, HMRC will require the proportion of students whose education is ‘business (i.e. fee-paying, not fully grant funded) in each case. This will vary from one course to another, but is likely to be in the region of 15-20%.

  1. The activity in question must be student-led and ‘essential’ to their education.

In the Brockenhurst case, both the training restaurant and the theatrical productions were staffed by students, for whom the activity was akin to a classroom. The wording ‘essential to the transactions exempted’ comes from the mandatory condition in Article 134 (a) of the Directive.

  1. The activity must not have the purpose of generating additional income for the body in direct competition with commercial enterprises.

In Brockenhurst, the training restaurant only provided meals to those who were on a restricted list, and only recovered 80% of the cost of the food. Hence they were not in competition with commercial enterprises, and were not generating additional income. Claimants must therefore be prepared to demonstrate whether the restaurant (theatre, beauty salon or other activity) is run so as not to generate additional income, and to provide figures which demonstrate this.”


The specific nature of HMRC’s interpretation of the application of this judgement will mean that colleges need to establish how their own similar activities are managed and run. The challenge to the restriction by HMRC to “business” related supplies of education is already under debate for example. Click here for the HMRC note


Contact your usual Centurion VAT adviser if this newly issued guidance raises specific concerns or speak to one of our Education team specialists 

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