One of the most difficult issues for a practitioner is determining when to combine supplies for VAT purposes and when to treat them separately. Over the past few months, we have written on several separate cases relating to various industries:
- VAT mixed or single supply (12 October 2012)
- Saving VAT on mixed supplies involving leased property (25 January 2013)
- VAT on combined supplies (21 February 2013)
The First-tier Tribunal has now considered a case involving education providers making supplies which are not education.
A college or university, school or academy, or any other exempt education provider might also make supplies of catering, entertainment (e.g. plays, concerts, etc.), trips, etc. which would otherwise be standard rated supplies. Which of these supplies are exempt as part of the supply of education?
The difficulty is demonstrated by the case of Brockenhurst College v Revenue & Customs Commissioners ( UKFTT 153 (TC), published on 14 March 2013). The taxpayer provided exempt educational and vocational courses. As part of these courses, drama students would put on a show, catering students would supply meals, and so on. Customers would pay for the tickets, meals, etc. The question was whether these supplies to members of the public could be exempt as part of the provision of education to the students.
Confirming that the exemption could apply, the Tribunal highlighted two points:
- The students received a direct benefit from putting on college shows and providing meals from the college restaurant.
- These catering and entertainment services were closely related to the main supply of education provided to the students.
The rather odd result is that the supplies of meals, plays, concerts, etc. to the public were also considered to be exempt because of the educational benefit of the supply to the students.
It is worth considering the positive impact of this decision for educational establishments. The benefits are not restricted to saving the VAT on future supplies. Many drama schools and catering colleges will have registered for and charged VAT on past supplies. Their last four years’ sales should now be reviewed and claims made for overpaid output VAT.
Furthermore the principles established in this case might be more widely applicable. Do educational establishments charge for admission to student film festivals, art exhibitions, fashion shows, science fairs; or for student haircuts, student beauty treatments, or any other supplies which form part of a student’s education?