Finance And Business Training Ltd v Revenue And Customs

The education exemption from VAT depends on both the nature of the educational service and the status of its supplier. A private provider must be recognised by the member state as having objects similar to those of a public-law body providing qualifying education.

A member state may identify recognised private bodies by objective statutory categories. The criteria must comply with fiscal neutrality and legal certainty. The United Kingdom validly restricted the university-education exemption to universities and sufficiently integrated colleges, institutions, schools and halls. Profit-making status is not itself disqualifying, but providing university-level courses does not dispense with the supplier condition.

Finance and Business Training Ltd provided courses leading to degrees awarded by the University of Wales. The First-tier Tribunal found that it supplied university education but was not sufficiently integrated with the University to constitute its college or hall under Group 6 of Schedule 9 to the Value Added Tax Act 1994.

The Upper Tribunal, in [2013] UKUT 594 (TCC), upheld that conclusion. Following a subsequent decision of the Court of Justice, the Court of Appeal permitted the provider to argue that the domestic conditions infringed the EU principles of fiscal neutrality and legal certainty. The central issue was whether EU law required it to receive the same VAT exemption as a university despite its failure to qualify under domestic law.

1. Appeal dismissed. Arden LJ held that the education exemption contained both a transaction condition and a supplier condition. Supplying university education was insufficient by itself. A private organisation also had to be recognised by the member state as having objects similar to those of a public-law body providing qualifying education.

2. EU law permitted and required member states to establish conditions for recognising private organisations. Parliament could exercise that discretion by listing the qualifying bodies. In the university context, Note 1(b) in Group 6 of Schedule 9 to the Value Added Tax Act 1994 drew a permissible line around universities and colleges, institutions, schools or halls sufficiently integrated into them. Such bodies were imbued with the university's objects and supplied education with the required public-interest element.

3. The combination of Note 1(b) and the factors identified in HMRC v School of Finance and Management (London) Ltd provided neutral, abstract and predetermined criteria. Those criteria permitted an objective assessment of the supplier's integration with a university and therefore satisfied legal certainty. Relevant matters included the permanence and nature of the relationship, the provider's other activities and its fundamental purpose. The tribunal's findings did not establish the necessary integration.

4. Fiscal neutrality did not require all suppliers of substantively similar courses to be treated alike without regard to supplier status. The appellant had to show that it belonged to the same class as institutions satisfying the integration test. The factual findings did not support that conclusion. Student perceptions therefore did not require determination.

5. Profit-making status did not preclude recognition. Note 1(b) and the integration factors applied equally to commercial and non-profit entities. The tribunals had not rejected the claim merely because the provider operated for profit.

6. Arden LJ rejected the proposition that an eligible body must receive the exemption for all of its activities. Exemption is activity-specific. That error in the Upper Tribunal's reasoning did not affect the result because the appellant independently failed the supplier integration test.

7. The existing Court of Justice jurisprudence was sufficient to determine the appeal, so a reference for a preliminary ruling was refused. Gloster and Sharp LJJ agreed with Arden LJ.

1. Court of Appeal (Civil Division): The appeal was dismissed by [2016] EWCA Civ 7. The court upheld the refusal of the VAT exemption, while disagreeing with the Upper Tribunal's all-or-nothing approach.
2. Upper Tribunal (Tax and Chancery Chamber): Morgan J, in [2013] UKUT 594 (TCC), held that the appellant was not an eligible body because it failed the integration factors. He also concluded that a body could not be eligible in one capacity and ineligible in another.
3. First-tier Tribunal: The tribunal found that the appellant supplied university education but was not sufficiently integrated with the University of Wales to constitute its college or hall.