The Advocate General’s opinion has been released in the Brockenhurst College case (C-699/15). This was a UK referral asking whether supplies of restaurant and entertainment services made by a college to paying members of the public (who were not the recipients of the college’s principal supply of education) are ‘closely related’ to the provision of education, and therefore exempt from VAT under EU law. The supplies were made or facilitated by the catering and performing arts students (being the recipients of the college’s principal supply of education) as part of their courses, and were an essential part of their education.
Brockenhurst operated a restaurant in which catering functions were undertaken by students under the supervision of their tutors. The restaurant charged for the meals at subsidised rates.The college’s performing arts students aslo staged concerts and performances for paying members of the public.
The First-tier Tribunal (FTT) had ruled that the supplies of restaurant and entertainment services by the college to members of the public were exempt from VAT as supplies of ‘services closely related to education’ and on appeal by HRMC the Upper Tribunal upheld the decision. The Court of Appeal decided to refer questions to the CJEU for a preliminary ruling.
The AG stated that the Directive does not define the concept of supplies ‘closely related’ to education. But it is clear from the actual wording of the provision that it does not cover the supply of goods or services which are unrelated to ‘children’s or young people’s education, school or university education, vocational training or retraining’. Furthermore, the supply of goods or services can be regarded as ‘closely related’ only where they are also considered to be ancillary to the principal supply.
The purpose and objective of the education exemption is that access to the provision of education, for the benefit of pupils, students and trainees, does not become more expensive due to VAT. Also the principle of fiscal neutrality must be taken into account in the interpretation of the exemptions in the Directive. From the perspective of the end consumer (in this case the third parties seeing the shows and eating in the restaurants), it is irrelevant whether the food is consumed in a normal restaurant or in a training restaurant, or in a normal theatre or a college theatre. In both cases, the consumer is fed/entertained and in both cases he pays money for that consumption.
The AG therefore said that closely related transactions do not include the supply of restaurant and entertainment services by an educational establishment to paying members of the public who are not recipients of the education.
This has been a long running case ans should the CJEU agree with the AG’s opinion, colleges which have submitted claims will have to reverse the claim process and revert to treating such income as taxable. This would impact on the partial exemption position for current and prior years, and in some cases capital goods scheme adjustments, where relevant.