Brockenhurst College - VAT recovery following HMRC’s updated guidance

Last month, HMRC published internal guidance on when it would be prepared to accept treatment of supplies similar to those which were at issue in the Brockenhurst College (C-699/15), as being ‘closely related to the supply of education’ and therefore not liable to VAT.
This followed cessation of all litigation in the Brockenhurst College appeal and HMRC accepting the decision of the Court of Justice of the European Union’s (CJEU).  In its guidance (VATEDU53400 ), HMRC insists that in order to benefit from the court’s decision, the supply had to satisfy the following three conditions:
  1. The education in question must be provided by way of business;
  2. The activity in question must be student-led and ‘essential’ to their education;
  3. The activity must not have the purpose of generating additional income for the body in direct competition with commercial enterprises.

What this means...

In essence, this means that not only is HMRC limiting the scope of the decision to the same or similar facts as those within the Brockenhurst College appeal, but it effectively, also means that education bodies providing grant funded education (such as Academies and some Further Education Colleges) would be unable to benefit from the Brockenhurst College decision, to the extent that their supply of education is treated as non-business.  They would instead, be expected to treat their ‘closely related supplies’ as taxable at the standard rate. That position would of course be perverse, especially because it would be at odds with HMRC’s own guidance in VAT Notice 701/30 and more importantly, because it discriminates against providers of grant funded education who would therefore not be able to benefit from the opportunities arising from this decision.

You will recall that, the Brockenhurst College opportunity arose from the Tribunal (both FTT and UT) looking at the question of whether charges made for certain supplies made by the college when it uses its own students could be considered to be VAT exempt.  The charges at issue were in respect of supplies for meals at the catering college where these had been prepared and served by students; and tickets to school plays and concerts performed by students.

HMRC contended that those supplies were taxable because the consumers were not students, and were not in receipt of education. However, in the understanding that the supplies provided the college students with the opportunity to practice, improve, and demonstrate their learning, the Tribunal found that these could be treated as ‘closely related to the supply of education’ and therefore, VAT exemption should apply to the charges made to third parties since the purpose of the supply was to further the education of the students (and not a commercial concern earnestly undertaken by the college).

What is the opportunity?  

Having now published their policy guidance (VATEDU53400 ) in relation to when supplies could be treated as closely related to education and therefore VAT exempt, it is clear that condition 1 above seeks to restrict the application of the Brockenhurst College decision only to providers of exempt education.  

Therefore, pending expected clarification of the situation from HMRC, providers of grant funded education who would ordinarily benefit from this opportunity, but for condition 1 above, might want to make and submit protective claims to treat similar supplies to those within the Brockenhurst College decision as ‘closely related’ to their supply of education and therefore non-business.

We would also suggest that going forward, should they choose to treat income from such supplies as non-business, they might want to consider setting aside a provision to cover any potential VAT liability from this.

Please speak to your usual Buzzacott contact if you have any questions. alternatively, please contact:

Thomas Mobee
VAT Senior Manager
T | +44 (0)20 7556 1320
E |

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