Finance and Business Training Ltd v HM Revenue and Customs

Permission to appeal should be granted where a subsequent Court of Justice decision raises an arguable question whether domestic VAT legislation complies with the education exemption in Article 132 of the Principal VAT Directive and the principle of fiscal neutrality. The issue is sufficiently important where the alleged incompatibility could affect the United Kingdom’s EU-law obligations and other education providers. The proposed appellant must demonstrate, by analysis of the domestic implementing legislation, that the legislation breaches fiscal neutrality. If that case succeeds, it is arguable that the provider may claim the exemption sought.

The appellant provided education services under arrangements with the University of Wales and sought exemption from VAT as an eligible body under Group 6, Item 1 in VATA 1994. The Tribunals rejected its argument that it was a college or institution of the University in relation to the relevant courses, and dismissed the appeal. The respondents did not appear in the Court of Appeal.

After the Upper Tribunal’s decision, the Court of Justice gave judgment in the MDDP case, Case C-319/12. The appellant relied on that decision to argue that an education provider may carry on commercial activities, that Member States must recognise qualifying organisations, and that domestic legislation should be reviewed for conformity with EU law and fiscal neutrality. The issue was whether that ground was properly arguable and should proceed to an appeal.

1. Permission and scope. Permission to appeal was granted on the single ground based on the MDDP case. Permission on the other grounds was refused, and the grounds were directed to be amended accordingly. A new skeleton argument was to be filed within 21 days, limited to the permitted ground.
2. Arguable EU-law issue. The later decision in Minister Finansów v MDDPsp z oo Akademia Biznesu, sp Kimandytowa, Case C-319/12, had not been fully considered by the Upper Tribunal because it post-dated that tribunal’s decision. It raised a properly arguable question whether a provider seeking the education exemption may carry on commercial activities and whether the domestic scheme complies with the obligation to recognise organisations with similar objects under Article 132 of the Principal VAT Directive.
3. Fiscal neutrality. The appellant had to establish, by deduction from the domestic implementing legislation, an alleged breach of the principle of fiscal neutrality. That question was arguable. The issue was important because an established breach could mean that the United Kingdom was failing to comply with its EU Treaty obligations and because other establishments providing education services might be similarly affected.
4. Potential consequence. It was also arguable that success on the MDDP ground could entitle the appellant to claim the VAT exemption sought.

• Court of Appeal (Civil Division): Permission to appeal was granted on the MDDP ground and refused on the other grounds. The permitted ground was directed to a further appeal from the Upper Tribunal.
• Upper Tribunal (Tax and Chancery Chamber): Mr Justice Morgan’s decision, [2013] UKUT 594 (TCC), dismissed the appellant’s appeal concerning its claimed education exemption.