Meaning of ‘supplies closely connected to education’
The Court of Appeal has decided to refer the case of HMRC v Brockenhurst College [for a preliminary ruling by the European Court (CJEU). The case relates to the VAT exemption applying to supplies ‘closely related’ to education. The college taught courses in catering, hospitality and performing arts. To enable students to learn practical skills, the college ran a restaurant in which the students provided the catering and the restaurant charged for the meals at 80% of the cost. The college’s performing arts students also staged concerts and performances for paying members of the public. The issue was whether the supplies of restaurant and entertainment services were exempt because they were ‘closely related’ to the provision of education.
The Court found that the interpretation and application of the exemption to the facts of the case were not clear. Furthermore, the facts were not unusual, so that this decision has a potentially wide impact. The Court of Appeal therefore decided to refer the issue to the CJEU for a preliminary ruling.
Why it matters
The UT had found for the college, on the basis that the exemption should not be applied narrowly and that there was no requirement that the ‘closely related’ ‘supply had to be made to the same recipient as the principal supply of education. However, HMRC pointed out that it is a long-established principle that exemptions from VAT must be interpreted narrowly. They take the view that a supply to someone other than those who are being trained/educated cannot be one of ‘education’ or one that is ancillary to education. Given the potentially very wide impact of the case to many bodies which provide exempt education (not just colleges but also arts organisations), the ultimate decision of the CJEU will be important.