VATEDU39370 - VATEDU39370: Group 6 Item 1 Education, research and vocational training provided by eligible bodies: Meaning of College of University
This guidance also applies to completely independent colleges.
The Principal VAT Directive (PVD) requires that university education is be exempt when supplied by a body governed by public law or by another organisation recognised by the Member State as ‘having similar objects’. It is a matter for the Member State to determine which organisations it recognises.
This exemption is implemented in UK law in Group 6 of Schedule 9 to VATA 1994.
Group 6 identifies those bodies whose supplies of education and training will be exempt. Note 1(b) defines an eligible body as including a United Kingdom university, and any college, institution, school or hall of such a university.
Unless a body falls within the description at Note (1)(b) or another part of Note (1) its supplies of education are liable at the standard rate of VAT. Some universities or bodies supplying education may qualify for VAT exemption because their non-profit making status meets the conditions of Note (1) (e).
There have been several appeals to the VAT Tribunal from bodies seeking VAT exemption under Note (1)(b).
The High Court in School of Finance and Management (“SFM”) [2001] STC 1690 and the Tribunal in HIBT Limited (“HIBT”) [Decision No 19978] considered the VAT status of supplies of education made by independent commercial profit-making companies in collaboration with a university.
SFM provided courses leading to the award of a degree by the University of Lincolnshire and Humberside. The students were taught on a campus that was remote from the university, but were entitled to certain services as students of the university.
HIBT provided courses on the campus of the University of Hertfordshire and its students were in many respects indistinguishable from students of the university. HIBT did not provide courses leading directly to the award of a degree but on successful completion of the course a student had the option to progress on to year one or two of an undergraduate or postgraduate course at the university.
Both SFM and HIBT were found to be providing university education leading to a qualification and the arrangements in place were considered sufficient for them to be regarded as colleges of the university in question so that their supplies fell within Note (1)(b) to Group 6. In SFM, the court concluded that to determine whether a body was a college of a university, one must look at the nature of the services supplied and the nature of the relationship between that body and the university. This originally involved the consideration of 15 factors. (These 15 factors have now reduced to 5 by the Supreme Court in the case of SAE Education Ltd).
In Finance and Business Training Ltd (“FBT”) [2016] STC 2190 the Court of Appeal decided that FBT was not entitled to exemption for the education that it supplied leading to the grant of degrees by the University of Wales because it was not an integrated part of that university. The Court of Appeal explained that Parliament had decided to draw the line between recognised bodies and other bodies not entitled to exemption at those colleges, halls and schools that were integrated into universities and were therefore imbued with the university’s objects.
The most recent and authoritative decision is that of the Supreme Court in SAE Education Ltd [2019] UKSC 14. The Court held that the phrase “any college of such a university” was not limited to colleges which were a constituent part of a university in a constitutional or structural sense, and in doing so, confirmed the decision of the Court of Appeal in FBT. The test should focus attention instead on the objects of the body in question, the nature of the educational services that it supplied, and how integrated those services were with those of the university. The Court noted the presence of a foundation or constitutional document or some other legal relationship establishing the college as a constituent part of the university in a constitutional or structural sense would normally be sufficient to prove that it was a college of the university. However, in over-turning the decision of the Court of Appeal that the constitutional or structural test was essential, it placed greater emphasis on five of the original SFM factors:
- whether the bodies have a common understanding that the college is a college of the university;
- whether the college can enrol or matriculate students as students of the university;
- whether those students are generally treated as students of the university during the course of their period of study;
- whether the body provides courses of study which are approved by the university; and
- whether the body can in due course present its students for examination for a degree from the university.
The Court concluded that the other original 10 factors were unlikely to be decisive.
HMRC concludes from the judgment that in the absence of the link establishing the college as a constituent part of the university, the college has to show through the application the above 5 factors that:
- it has similar objects to the university,
- it has a close relationship with the university, and
- its activities are recognised by and integrated with the university.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)