St Patrick’s International College Limited & Ors v The Commissioners for HMRC
[2023] UKFTT 408 (TC)
Colchester Institute Corporation (No 2) v The Commissioners for HMRC
4 March 2024
[2024] UKFTT 191 (TC)
First-tier Tribunal
A college got a big VAT bill because the government said the money it gave the college was payment for teaching. A court decided the money *was* payment, so the college didn't owe the VAT bill on the teaching part, only a smaller amount on other things.
Key Facts
- •Colchester Institute Corporation (CIC) appealed a VAT assessment of £123,642.
- •The assessment was for underdeclared output tax (£98,965.88) related to government funding received for providing free education and vocational training.
- •CIC received funding from the Skills Funding Agency (SFA) and the Education Funding Agency (EFA).
- •The appeal concerned whether these government grants constituted "consideration" for the supply of educational services for VAT purposes.
- •CIC argued that the provision of education was a business activity, regardless of funding source.
- •The appeal against the disallowed input tax (£24,676.66) was withdrawn.
Legal Principles
Whether government grants received by Further Education Colleges (FECs) constitute 'consideration' for VAT purposes when providing free education.
Section 5(6)(a) VATA and Article 2(1) of the PVD
Definition of 'taxable person' for VAT purposes.
Article 9(1) of the PVD
Rules for deducting input VAT.
Article 168, 173 of the PVD
Definition of 'supply' and 'supply of services' for VAT purposes.
Section 5 VATA, Section 4 VATA
Deemed supply of goods for private use.
Paragraph 5(4) of Schedule 4 to VATA
Treatment of input tax credit where a deemed supply is later found not to be a supply.
Paragraph 4 of Schedule 8 to the Finance (No.3) Act 2010
Commissioners' power to assess VAT.
Section 73 VATA
Outcomes
Appeal allowed in part.
The Tribunal was bound by the Upper Tribunal's decision in *Colchester Institute Corporation v HMRC [2020] UKUT 368 (TCC)*, which determined that the government grants were consideration for the supply of education services. Therefore, the output tax assessment was invalid.
Assessment reduced to £24,676.66.
This represents the disallowed input tax element of the original assessment, as the appeal regarding the output tax was successful.