The Commissioners for HMRC v Colchester Institute Corporation

Where an earlier Upper Tribunal decision has resolved the same VAT consideration issue on materially similar facts, a later tribunal should apply that decision unless persuaded that it was wrong. Government funding for education or vocational training may therefore be consideration for supplies to students where the required direct link is established.

A party may reserve a ground for an onward appeal rather than argue it before the Upper Tribunal. That course may conserve resources, but it carries procedural risks and does not prevent dismissal of the appeal where the reserved point is determinative.

HMRC appealed from the First-tier Tribunal decision in Colchester Institute Corporation v HMRC [2024] UKFTT 00191. The First-tier Tribunal had allowed the college’s appeal against an output-tax assessment relating to education and vocational training funded by the Skills Funding Agency and Education Funding Agency.

The central issue was whether the grants were consideration for the free services supplied to students. An earlier Upper Tribunal decision between the same parties, concerning materially similar funding arrangements in earlier VAT periods, had resolved that issue in the college’s favour. HMRC obtained permission to argue that the earlier decision was wrong, but before the Upper Tribunal reserved that argument for any onward appeal and accepted that its present appeal must fail.

1. HMRC’s appeal was dismissed. The earlier Upper Tribunal decision, Colchester Institute Corporation v HMRC [2020] UKUT 368 (TCC), had decided the same consideration issue in the college’s favour on materially similar facts. Its reasoning applied equally to the current funding arrangements. The First-tier Tribunal was therefore correct to allow the college’s appeal (paras 20–21).

2. For VAT purposes, Article 2(1) of the Principal VAT Directive requires a supply of services to be for consideration. The earlier decision had held that the government grants were directly linked to the education and training supplied to students. HMRC accepted that conclusion determined this appeal.

3. The Upper Tribunal is not formally bound by its own earlier decisions. Judicial comity nevertheless means that a later tribunal will normally follow an earlier co-ordinate decision unless satisfied that it was wrong. HMRC did not seek to satisfy the Tribunal that the earlier decision was wrong in this appeal.

4. The Tribunal accepted HMRC’s reservation of its arguments for a possible onward appeal. A reservation may extend to the whole ground of appeal as well as part of it, particularly where it conserves judicial and party resources. It is, however, a course carrying risks: there is no leapfrog appeal from the First-tier Tribunal, and any later appellate court may not have the benefit of full Upper Tribunal analysis of the reserved arguments (paras 16–18).

5. The Tribunal expressly left undecided the relevance of Balgarska natsionalna televizia, because HMRC did not press that argument before it.

• Upper Tribunal (Tax and Chancery Chamber): HMRC’s appeal was dismissed. The Tribunal held that the earlier Upper Tribunal decision on materially similar facts applied to the present appeal.

• First-tier Tribunal (Tax Chamber): In Colchester Institute Corporation v HMRC [2024] UKFTT 00191, the college’s appeal against the output-tax assessment was allowed because the First-tier Tribunal was bound by the earlier Upper Tribunal decision on the consideration issue.