Education Sector VAT Case Updates
Wakefield College: Appeal dismissed
The Court of Appeal has dismissed Wakefield College’s appeal, which centred around whether education provided to students who paid a fee, but whose education was mostly grant-funded, was a non-business activity. During the appeal the College persuaded the Court that it was necessary to look objectively at the whole of the activity. However, the Court decided that the charges made by College to students amounted to a business activity. The Court reached this conclusion on the basis that the proportion of the education costs paid by students (25-30%) were “significant”. The decision took into account the proportion of courses provided to such students (13%), the amount paid by each student (£896 for the example BTEC), the overall fee income (£290k). As a result, the Court concluded that the provision of further education to fee-paying students is a business activity for VAT purposes.
Cambridge University: VAT recovery on investment managements referred to CJEU
In this case the university argued that the income produced by an endowment fund was used to support the activity of the university as a whole, and therefore was entitled to part recovery of VAT on the management charges. However, HMRC’s considered that the fund was a private investor and as such was a non-business activity which broke the link between the fund management and the University’s taxable activity. The Court of Appeal reviewed recent CJEU judgments concerning input tax recovery, including Iberdrola and Sveda, but decided that they were unclear on the application to the University’s situation. The COA has requested guidance from CJEU’s on whether it should look through the passive receipt of fund management services to the ultimate purpose of the services in supporting the University’s activity.
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