Wakefield College v Revenue And Customs

A supply made for consideration under article 2(1) of the VAT Directive is a necessary, but insufficient, condition for an economic activity under article 9(1). Consideration requires reciprocal performance and need not match the cost or value of the supply. Economic activity instead requires an objective and fact-sensitive assessment of whether the supply is made to obtain income on a continuing basis.

The assessment considers all the circumstances. A sufficiently direct link is only shorthand for that broader inquiry, not a separate test or checklist. Fixed, substantial subsidised fees which materially contribute to course costs, are cost-related, and are charged by a typical participant in an education market can amount to remuneration. The resulting activity is business use for charitable construction zero-rating.

Wakefield College, a charity, constructed the skillsXchange building for vocational and other educational courses. It sought zero-rating for the construction services under group 5 of schedule 8 to the Value Added Tax Act 1994.

The College accepted that courses charged at full cost were business activities. HMRC accepted that courses supplied free to fee-remitted students were not. The dispute concerned courses for which students paid a fixed fee substantially subsidised by public funding.

The First-tier Tribunal held that those courses were not an economic activity. The Upper Tribunal reversed that decision and held the construction services were not zero-rated. Permission to appeal was granted after the CJEU decision in Gemeente Borsele v Staatssecretaris van Financiën, which clarified the distinction between consideration and remuneration. The central issue was whether the subsidised-fee courses were an economic activity for VAT purposes.

1. Appeal dismissed. David Richards LJ, with whom Moylan and Patten LJJ agreed, upheld the Upper Tribunal's conclusion, although on a different legal basis. The construction services were not zero-rated.

2. The Value Added Tax Act 1994 had to be interpreted consistently with the VAT Directive. Under article 2(1), a supply is made for consideration where a legal relationship creates reciprocal performance. The payment is the price for the supply and need not equal its cost or value. The students who paid subsidised fees therefore provided consideration.

3. Article 9(1) asks a distinct and broader question: whether the supplies were made to obtain income on a continuing basis, described in the authorities as being made for remuneration. The inquiry is wholly objective and requires consideration of all the circumstances. There is no presumption that a supply for consideration is an economic activity. Nor is a sufficiently direct link a separate test; it is only shorthand for the wider inquiry. The Court explained the earlier authorities, including Gemeente Borsele v Staatssecretaris van Financiën C-520/14 and Commission of the European Communities v Finland C-246/08, on that basis.

4. The subsidised-fee courses were an economic activity. Education was the College's sole general activity, and the subsidised courses formed a significant part of it. The fixed fees were substantial, contributed about 25–30% of the relevant course costs, and were set by reference to cost-related national rates rather than the means of individual students. The College was a typical participant in a viable further and higher education market, unlike the local authority providing ancillary school transport in Borsele.

5. Accordingly, the courses were supplied in the course or furtherance of a business within Note (6) to group 5 of schedule 8. The building was therefore used for business beyond the accepted de minimis allowance, and the construction services did not qualify for zero-rating.

• Court of Appeal (Civil Division): dismissed the College's appeal in Wakefield College v Revenue And Customs [2018] EWCA Civ 952, affirming the Upper Tribunal's conclusion on different grounds.

• Upper Tribunal (Tax and Chancery Chamber): reversed the First-tier Tribunal and held that the construction services were not zero-rated.

• First-tier Tribunal: in its second decision, held that the subsidised-fee courses were not an economic activity. An earlier Upper Tribunal decision had remitted issues to the First-tier Tribunal following the original hearing.