College’s ancillary activities are ‘closely related’ to education

On 4 May the CJEU held that Brockenhurst College’s supplies of catering and entertainment services, when proivded by students as part of their courses, are closely related to education and exempt.

The case concerned charges the College made for meals prepared and served by students as part of catering courses and for tickets for student performances which were also intended to give students an opportunity to develop their skills.  The question was whether these were taxable, since the recipients were not students, or whether they were exempt, because the purpose of the activities was to further the education of the students – and thus were ‘closely related’ to the College’s educational supplies.

The CJEU has agreed with the First and Upper Tribunal and ruled that the charges are exempt. The Court decided that ‘closely related’ was  the same as ‘ancillary’ and thus the catering and entertainment was not an end in itself, but supported the principal supply of education.  The legislation does not require these ancillary supplies to be made to the student in situations where the supplies are for the purpose of enhancing the student’s education, and did not generate additional financial resources, and as long as the activity did not compete unfairly with other commercial businesses.

The Court found that in this case the College’s customers were always associated with students or the college, and there was no general admission for the public.  The catering and performances were not to professional standards, and the main reason they were undertaken was to develop the students.  As such the activities were unlike their commercial equivalents which benefit only the consumer, and thus there was no unfair competition.

Furthermore, the College charged only 80% of the costs, so there was no intention to raise funds in relation to the activities. As the motive was to educate the students the supplies were exempt provided that such activities are essential to the students’ education and their basic purpose is not to obtain additional income for that establishment by carrying out transactions in direct competition with those of commercial enterprises. On the latter point the ECJ ruled that it is for the national courts to determine and this will therefore be referred back to the Court of Appeal.

Any educational bodies which have not already made protective claims to HMRC for overpaid VAT on such supplies should now do so.