VAT News

VAT Case – Glasgow School of Arts


Interesting case for VAT in the context of the Upper Tribunal’s comments on what constitutes “economic activity” in this instance between a University and its Student Union body. The issue for the Tribunal to address was whether the Glasgow School of Art (GSOA) was entitled to recover the VAT incurred on the works on to specific part of the building that was being leased to the Student Union (SU) body.

Initially VAT on the monthly invoices for the whole construction project was treated as residual VAT. The GSOA had opted to tax the building so the lease charged to the SU was subject to VAT and VAT was charged and accounted for. The taxpayer then presented an argument that having received amended invoices from the contractor for the element of the work on the distinct part that housed the SU that this should be recoverable in full as it wholly related to the taxable lease to the SU.

The questions were therefore:

  • Whether the works relating to the SU building constituted a separate supply and
  • If it could be regarded as such – could the VAT be related to taxable supplies to the SU of the lease of the building for a consideration which constituted an economic activity in the context of VAT.

Clearly the facts of the arrangements are important and you can read the detail of the case HERE

It clearly highlights the importance of a distinct procurement and contract process for the supply of services in cases where the overall project may support a variety of uses by the appellant. So, the case fell at the first hurdle of point 1.

The other aspect of concern here though is the Tribunal comments that - whilst the SU was a separate body from the University and the lease charged, whilst not at “market rates” was far from being a peppercorn –  due to the “symbiotic relationship” between the University and the SU the lease arrangement fell short of being an “economic activity”.

Therefore, if they had considered point 2, the Tribunal would have taken the view that the input tax would not have been recoverable even if a separate supply of construction services were seen, as being made in relation to that part of the building. They didn’t see the lease as being a taxable supply in effect.

What will HMRC make of this point on the arrangements between Universities and their Students Unions is the question? One to watch we would suggest.

If you have a concern over any aspects raised by this case in terms of your arrangement with Student Unions then do make contact with your Centurion VAT & Education contact or drop us a note at

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