HM Revenue and Customs v Brockenhurst College

A preliminary reference is appropriate where an important EU-law question is not acte clair and has not been directly resolved by existing authority. The question whether restaurant and entertainment services supplied by an educational establishment to paying members of the public are closely related to education under Article 132(1)(i) was not acte clair. The uncertainty remained where students supplied the services as part of practical training, while the public received and consumed them. Existing authority did not resolve the significance of student benefit, recipient identity, ancillary supply principles, essentiality or fiscal neutrality. The Court therefore proposed a reference to the CJEU and made no final ruling on the VAT exemption.

HMRC appealed to the Court of Appeal from the Upper Tribunal (Tax and Chancery Chamber), which had dismissed HMRC’s appeal from the First-tier Tribunal. The tribunals held that restaurant and entertainment services supplied by Brockenhurst College were exempt from VAT as services closely related to education.

The College’s catering and performing arts students provided the services in practical training, but the services were supplied to paying members of the public. The central issue was whether those supplies fell within Article 132(1)(i) of the Principal VAT Directive, particularly where the students benefited educationally but were not the consumers.

Both parties supported a reference to the CJEU because the issue was important, unresolved and not acte clair.

The Court gave a judgment of the Court and did not finally determine whether the supplies were exempt.

1. The appeal concerned whether the College’s restaurant and entertainment services were closely related to its exempt educational supplies under Article 132(1)(i) of the Principal VAT Directive (2006/112/EC). Article 134(a) imposed a further restriction for supplies that were not essential to the exempt transactions.
2. The existing authorities supplied relevant principles but did not resolve the present combination of circumstances. Skatteverket v PFC Clinic AB [2013] STC 1253 concerned construction consistent with the exemption’s objective. EC Commission v Federal Republic of Germany [2002] STC 982 concerned the scope of closely related activities. Horizon College [2008] STC 2145 addressed ancillary supplies, essentiality and supplies not made directly to the students.
3. HMRC argued that the students’ educational benefit was insufficient because the public received and consumed the services. On that analysis, the public supplies were principal supplies and were distinct from the College’s educational supply. HMRC also relied on fiscal neutrality. The Court did not resolve those competing arguments.
4. In the absence of direct authority, the Court was satisfied that the interpretation and application of Article 132(1)(i) were not acte clair. The facts were not unusual, and the issue had potentially wide impact. A reference under Article 267 of the Treaty on the Functioning of the European Union was therefore appropriate.
5. The Court proposed to make the reference. The parties were directed to liaise with the Court to agree its terms.

• Court of Appeal (Civil Division): In [2015] EWCA Civ 1196, the Court proposed a reference to the CJEU on the unresolved VAT issues.
• Upper Tribunal (Tax and Chancery Chamber): Dismissed HMRC’s appeal and upheld the exemption.
• First-tier Tribunal (Tax Chamber): Held that the restaurant and entertainment supplies were exempt from VAT.