St Patrick's International College & Ors Ltd v The Commissioners for HMRC

Fiscal neutrality requires similarity to be assessed from the typical consumer’s perspective when applying the supplier condition for the VAT education exemption. Differences in suppliers’ regulatory or legal regimes must be assessed by their significance to consumers. Where domestic recognition rules infringe fiscal neutrality, qualifying suppliers may rely on the exemption’s direct effect. The Court of Appeal remains bound, subject to established exceptions, by its earlier interpretation of the relevant EU case law. EU primacy does not permit departure merely because a party advocates a different interpretation of that law. An alleged absence of discernible reasoning does not itself establish that the earlier decision was given per incuriam.

St Patrick’s International College Limited, London College of Contemporary Arts Limited and Interactive Manchester Limited were alternative providers of higher education. They lacked degree-awarding powers and university title. Their courses included Higher National Certificates and Higher National Diplomas; Interactive Manchester also supplied degree courses and teaching of English as a foreign language. HMRC assessed VAT on supplies made between 1 December 2012 and 6 August 2017.

The providers challenged the assessments, contending that their exclusion from the education exemption infringed fiscal neutrality under Article 132(1)(i) of Council Directive 2006/112/EC. They also advanced claims under Group 6 of Schedule 9 to the Value Added Tax Act 1994. The First-tier Tribunal dismissed their appeals in [2023] UKFTT 00408 (TC), and the Upper Tribunal dismissed their further appeals in [2025] UKUT 101 (TCC).

Permission to appeal covered the proper fiscal-neutrality test, the consistency of recognition conditions and the scope of Interactive Manchester’s exemption as a supplier of English-language teaching. The central issue was whether similarity under the supplier condition had to be assessed from the typical consumer’s perspective. A prior Court of Appeal decision, which had not been cited to the Upper Tribunal, became decisive.

1. The appeals were allowed on ground 1. The First-tier Tribunal and Upper Tribunal had erred in concluding that the typical-consumer test did not apply to the supplier condition in Article 132(1)(i). Miles LJ’s reasoning commanded a majority, Henderson agreeing. Lewison LJ expressly agreed that the relevant earlier reasoning was binding and that the appeal should be allowed.

2. The education exemption contained cumulative supply and supplier conditions. Member States had discretion to recognise organisations outside public administration as having similar educational objects. That discretion remained subject to equal treatment and fiscal neutrality. The presence of a supplier condition did not remove the requirement to assess similarity from the typical consumer’s perspective (paras 11–13, 63–64 and 72).

3. In Leisure, Independence, Friendship and Enablement Services Ltd v Revenue and Customs Commissioners [2020] EWCA Civ 452, the typical-consumer approach formed part of the essential reasoning concerning Article 132(1)(g). It was common ground that the same reasoning applied to the education exemption. The test drawn from Rank Group Plc v Revenue and Customs Commissioners required consideration of similar characteristics, the same consumer needs and whether differences significantly influenced consumer choice. Regulatory differences were considered through that perspective (paras 57–64).

4. The Court of Appeal was bound by its earlier decision, subject to the established exceptions associated with Young v Bristol Aeroplane Company Ltd [1944] KB 718. The earlier reasoning was transparent. Even an absence of transparent reasoning would not itself make the decision per incuriam; HMRC identified neither an overlooked legal rule nor a material subsequent change in ECJ jurisprudence. EU primacy addressed conflicts between EU law and domestic law. It did not authorise departure from a binding domestic decision interpreting the same EU authorities merely because a different interpretation was advanced (paras 65–70).

5. HMRC did not dispute that applying the correct test would establish an infringement of fiscal neutrality in excluding these providers from exemption. Their entitlement to rely on direct effect where implementation was defective was common ground. The appeals therefore succeeded without further factual determination. Grounds 2 and 3 did not arise. The court left open both the underlying merits of HMRC’s interpretation of the European authorities and the effect of the post-exit abolition of EU supremacy (paras 3, 71–73).

• Court of Appeal (Civil Division): [2026] EWCA Civ 852 . Allowed the related appeals on ground 1, holding that the tribunals had applied the wrong fiscal-neutrality test. Grounds 2 and 3 did not arise.
• Upper Tribunal (Tax and Chancery Chamber): [2025] UKUT 101 (TCC) , decision given on 24 March 2025. Dismissed the providers’ appeals. Granted permission on three grounds concerning fiscal neutrality and the scope of the English-language teaching exemption. Refused permission on the public-funding issue.
• First-tier Tribunal: [2023] UKFTT 00408 (TC), decision handed down on 3 May 2023. Dismissed the appeals against HMRC’s assessments, finding no breach of fiscal neutrality and no domestic exemption beyond Interactive Manchester’s English-language teaching supplies. Its finding that Interactive Manchester was not a college of a university was not appealed.