College training restaurant's supplies VAT exempt

In Fareham College v HMRC [2023] TC08740, the First Tier Tribunal (FTT) found that supplies made to members of the public by a college’s training restaurant were exempt from VAT.

• During the period 1 May 2011 to 30 April 2015, Fareham College accounted for output VAT on supplies made to members of the public from its training restaurant, hair and beauty salon and a performing arts centre.
• These supplies used students attending related courses run by the college and were essential to the vocational training provided.
• On 30 July 2015, the college made a claim to HMRC for repayment of overpaid output VAT totalling almost £70,000.
  • This was on the basis that the supplies were not in fact taxable, but exempt from VAT under Item 4, Group 6, Schedule 9, of the Value Added Tax Act 1994, which exempts supplies closely related to exempt Supplies of education.
• HMRC refused the repayment claim and subsequently upheld their position on Statutory review.
• Fareham College Appealed to the First Tier Tribunal (FTT).

The FTT found that:

• Item 4 should be interpreted as including the exclusion from VAT exemption in Article 134(b) of the Principal VAT Directive.
  • Article 134(b) excludes certain supplies from VAT exemption where the basic purpose of the supply is to obtain additional income for the body through transactions which are in direct competition with those of commercial enterprises subject to VAT.
• Fareham College had the burden of showing that the assessment issued, or decision reached, by HMRC was wrong.
• The basic purpose of the training restaurant purpose was to provide a realistic working environment for students to pursue their courses and qualifications, not to obtain additional income.
  • These supplies fell within the VAT exemption.
• Evidence was insufficient to conclude whether student supplies from the salons were profitable or whether they produced additional income for the college.
  • There was little evidence as to how the relevant supplies were made and how they might differ from those in a commercial salon.
• No submissions were made in relation to the performing arts centre.
• The FTT could not be satisfied that the basic purpose of the college’s supplies from the salons and performing arts centre was not to obtain additional income through transactions which were in direct competition with those of commercial enterprises subject to VAT.
  • These supplies could not fall within the VAT exemption.

The appeal was allowed in part. 

Useful guides on this topic

Education & VAT
What rate of VAT applies to education? What sort of services are classed as education? What do you do if you have multiple supplies including education? What cases are there on VAT and education?

Food: Catering and takeaway
What is the VAT rate charged on food? How does this differ depending on hot or cold food and food consumed on or off the supplier's premises? 

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Statutory Review (by HMRC)
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

External link

Fareham College v HMRC [2023] TC08740