Case Alert Wakefield College - Upper Tribunal

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Information about Case Alert Wakefield College - Upper Tribunal

Published on January 25, 2016

Author: GrahamBrearley


1. © 2016 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. GRT100456 Summary This is the second hearing of this case at the Upper Tribunal. The construction of a building for a relevant charitable purpose can be zero-rated. The definition of relevant charitable purpose includes the use of a building by a charity otherwise than in the course or furtherance of a business activity. Wakefield College is a charity and claimed zero-rating for the construction of one of its campus buildings. It claimed, following the Commission v Finland case, that its income from fees paid by students or their employers was not consideration for a supply of services. The Upper Tribunal has allowed HMRC's appeal. 22 January 2016 Upper Tribunal The Upper Tribunal has released its second judgment in this appeal having sent the original appeal back to the First-tier Tribunal for a rehearing of the facts. The issue – whether the construction of a building qualifies for zero-rating under UK VAT law – rested in this case on whether the College intended to use the building for a relevant charitable purpose. The First-tier Tribunal concluded (at the second hearing) that, as the fees paid by certain students were set according to various factors, the fees could not (following the CJEU's judgment in Commission v Finland), be regarded as 'consideration' for the supply of education. As such, the income of the College was not derived from the carrying on of an economic activity and, as a result, the use of the particular building was for a relevant charitable purpose. HMRC appealed to the Upper Tribunal. Essentially, the dispute centred around those students aged over 19 where either they, or their employer were expected to contribute to the cost of their courses. HMRC considered that the contribution made in this way was consideration for a supply of education services and should, therefore, be regarded for VAT purposes as income from the operation of a business. The Upper Tribunal confirmed that where students have their fees abated to reflect their personal circumstances, the supplies of education are outside the scope of VAT. However, where the student's personal circumstances do not entitle him to an abated fee, the income should be regarded as consideration and thus business income. This is the case even though the fee charged by the College is below cost. The Tribunal considers that the crucial distinction here is the fact that the student pays the full advertised price and is not entitled to any abatement due to personal circumstances. Comment – Although the Tribunal allowed HMRC's appeal, this is not necessarily a disaster for Colleges. If non-business activities remain above 95% a College should be entitled to claim that it is not acting in the course or furtherance of a business for VAT purposes. In such circumstances, the construction of a building will continue to qualify for zero-rating as a building intended to be used by a charity for non-business purposes. HMRC v Wakefield College Case Alert Contact Stuart Brodie Scotland (0)14 1223 0683 Karen Robb London & South East (0)20 772 82556

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