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No change on VAT education exemption policy

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In Finance and Business Training Ltd v HMRC [2014] EWCA Civ 1412, the Court of Appeal ruled that the taxpayer should be given permission to challenge the lawfulness of the UK’s implementation of the education exemption under article 132 of the Principal VAT Directive. One of the key issues for consideration will be whether the treatment of the education exemption in VATA 1994 breaches European law.

Representing the taxpayer, Melanie Hall QC of Monckton Chambers commented: ‘For the very first time, the Court of Appeal will scrutinise HMRC’s interpretation of the education exemption by reference to EU law principles. If successful, the challenge will pave the way for commercial education providers to broaden the scope of their exempt activities’.

Meanwhile, HMRC released Revenue and Customs Brief 39/2014: VAT – liability catering and other services linked to education, setting out its position on the litigation in Brockenhurst College following the decision of the Upper Tribunal, regarding supplies closely related to education. HMRC will not alter its current policy on the VAT educational exemption until the Court of Appeal has delivered its judgment in the Brockenhurst College case next year, although it will consider claims and interim repayments based on the Upper Tribunal’s decision. The FTT and UT have both held that supplies made by students to third parties were sufficiently closely related to exempt supplies of education. HMRC maintains that students must be the direct beneficiaries for the supplies to qualify for exemption.

Categories: News , Indirect taxes , VAT