Under EU law, provided that certain conditions are met, the supply of education is exempt from VAT. In addition, the supply of goods or of services closely related thereto are also exempt from VAT. The question to resolve in this case is whether supplies of services (restaurant meals and performances) provided by the College to members of the public for consideration is a 'closely related' supply which should also benefit from the exemption. In both cases, the students gain practical experience as part of their courses. HMRC considers that the supplies are separate from the education and are taxable at the standard rate of VAT. The Court of Justice will deliver its judgement in due course.

1. © 2015 Grant Thornton UK LLP. All rights reserved.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms
provide assurance, tax and advisory services to their clients and/or refers to one or
more member firms, as the context requires.
Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL).
GTIL and the member firms are not a worldwide partnership. GTIL and each member
firm is a separate legal entity. Services are delivered by the member firms. GTIL does
not provide services to clients. GTIL and its member firms are not agents of, and do not
obligate, one another and are not liable for one another’s acts or omissions.
This publication has been prepared only as a guide. No responsibility can be accepted
by us for loss occasioned to any person acting or refraining from acting as a result of
any material in this publication.
grant-thornton.co.uk
GRT100456
Summary
Under EU law, provided that certain
conditions are met, the supply of
education is exempt from VAT. In
addition, the supply of goods or of
services closely related thereto are
also exempt from VAT.
The question to resolve in this case
is whether supplies of services
(restaurant meals and performances)
provided by the College to members
of the public for consideration is a
'closely related' supply which should
also benefit from the exemption.
In both cases, the students gain
practical experience as part of their
courses. HMRC considers that the
supplies are separate from the
education and are taxable at the
standard rate of VAT.
The Court of Justice will deliver its
judgment in due course.
4 December 2015
Court of Appeal
The Court of Appeal has finally issued its judgment in the Brockenhurst College case.
The issue at stake here is the question of whether certain supplies made for
consideration by the college to members of the public are exempt from VAT as being
'closely related' to the supply of education it makes to students. The college contends
that they are so related whereas HMRC consider that they are separate supplies and are
liable to VAT at the standard rate of 20%.
In earlier hearings at the First-tier Tax Tribunal (FTT) and the Upper Tribunal (UT),
the matter was decided in favour of the College. This is HMRC's appeal from the UT.
As is common with many colleges of further education, students enrol onto various
courses. The courses in question in this case were courses related to catering and to the
performing arts. As part of the curriculum, students were given practical experience of
catering to members of the public in the college training restaurant. Similarly, as far as
performing arts were concerned, students put on shows and entertainment to
members of the public. In both scenarios, the members of the public attending either
the restaurant or the entertainment paid money for the meal or entrance ticket.
The College maintains that although the supplies are made to members of the public,
nevertheless, the supplies are closely related to the principal supply of education
provided to the students. The VAT Directive provides an exemption for such closely
related services.
The Court of Appeal agreed with both parties that the VAT Directive is not clear and
that, in order to obtain clarity on the meaning of the term 'closely related', it is
necessary for the matter to be referred to the Court of Justice for a preliminary ruling.
Comment – What seems a relatively straightforward issue appears to have three
eminent appeal court judges in something of a quandary. It will now taker a
further 18 months or so to get a definitive answer.
HMRC v Brockenhurst College
Case Alert
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556