SAE Education Ltd v The Commissioners for HMRC

For VAT purposes, a body is a college of a university only if it is a constituent part of the university in a constitutional or structural sense. That status must arise from a legal relationship, whether a formal foundation or another binding arrangement. A separate commercial provider does not qualify merely because it supplies validated degree courses, has academic links, receives accreditation, or gives students access to university benefits. Recognition by the university is relevant evidence but is not conclusive. The inquiry is objective and requires a high degree of integration. The appeal was dismissed.

SAE Education Ltd was assessed to VAT for supplies of education made between 1 May 2009 and 29 February 2012. It claimed exemption under Group 6 of Schedule 9 to the Value Added Tax Act 1994, contending that it was a college of Middlesex University and therefore an eligible body.

The First-tier Tribunal allowed the appeal. The Upper Tribunal reversed that decision in [2016] UKUT 193 (TCC). The principal issue before the Court of Appeal was the meaning of college of a university and whether the First-tier Tribunal had applied the correct legal test.

The appeal was dismissed. Lord Justice Patten gave the leading judgment, with Lady Justice Black and Lord Justice Sales agreeing.

1. Statutory context. Article 132(1)(i) of the Principal VAT Directive permits Member States to identify the non-public organisations recognised as having similar objects to public educational bodies. The United Kingdom implemented that choice by defining eligible bodies in Note 1(b) to Group 6 of Schedule 9 to the Value Added Tax Act 1994. Later drafting changes did not widen the substance of the exemption.
2. Meaning of college. The phrase college of a university requires an objective and relatively hard-edged inquiry into the core legal relationship between the bodies. The claimant must be a constituent or structural part of the university. A formal constitutional instrument is unnecessary if another binding arrangement establishes that status, but the arrangement must make the college part of the university in a real sense. It must not merely be an external provider to which the university has outsourced selected courses.
3. Relevant factors. Recognition by the university is relevant evidence but is neither conclusive nor a sequential precondition. Academic links, shared objects, accreditation, quality assurance, student membership and access to university facilities may reflect integration, but they cannot replace the necessary legal and structural relationship. Self-governance and financial independence are not necessarily inconsistent with college status.
4. The Court rejected the broad multi-factorial approach adopted in School of Finance and Management and later tribunal decisions. The approach in London College of Computing was also not accepted insofar as it treated academic links and college status as alternatives. The objective test did not infringe legal certainty or fiscal neutrality, consistently with Finance and Business Training.
5. SAE remained a separate commercial organisation. Its agreements, accreditation and special associate college agreement did not make it constitutionally or structurally part of Middlesex University. It provided a limited number of specialised courses, with defined rather than general university rights for students, and remained an external provider. It therefore was not an eligible body.
6. The usual appellate restraint applicable to fact-and-degree assessments did not prevent intervention where the First-tier Tribunal had applied the wrong legal test. The First-tier Tribunal had erred in law by adopting the rejected multi-factorial approach.

1. Court of Appeal (Civil Division): dismissed the appeal, for reasons differing in material respects from those of the Upper Tribunal.
2. Upper Tribunal (Tax and Chancery Chamber): reversed the First-tier Tribunal’s decision in [2016] UKUT 193 (TCC).
3. First-tier Tribunal: allowed SAE Education Ltd’s appeal against the VAT assessments.