Commissioners of Customs and Excise v Leicester University Student Union
| Jurisdiction | England & Wales |
| Judgment Date | 23 March 2001 |
| Date | 23 March 2001 |
| Court | Chancery Division |
Chancery Division.
Rimer J.
Owain Thomas (instructed by the solicitor for the commissioners of Customs and Excise) for the Crown.
Rupert Baldry (instructed by Bray & Bray) for the respondent.
Value added tax - Exempt supplies - Preliminary issue - Supply of soft drinks to students by students' union not exempt - Supplies of soft drinks not made by same eligible body as was making principal supplies of education - Students' union not an integral part of university - Value Added Tax Act 1994, Sch. 9, Grp. 6, item 4.
The University of Leicester ("the University") was established as a corporate body by Royal Charter on 1 May 1957. Clause 13 provided that there should be a students' union and accordingly the respondent ("the Union") was established. It carried out the functions of a typical students' union. These included the sale of soft drinks to students. In the past, the Union accounted for output tax at the standard rate on these supplies. On 30 September 1998, it claimed repayment of output tax for the periods December 1995 to July 1998, contending that these supplies were exempt. The tribunal decided as a preliminary issue that the Union was an integral part of the University and thus an eligible body for the purposes of Value Added Tax Act 1994 schedule 9 group 6Grp. 6 of Sch. 9 to the Value Added Tax Act 1994 (No. 16,792; [2001] BVC 2102). The commissioners appealed.
Whether the Union was an integral part of the University so that supplies made by the Union could be properly regarded as supplies made by the University.
Held, allowing Customs' appeal:
The Union is not an integral part of the University. The soft drinks sold at the Union shop could only be exempt if two conditions were satisfied:
(i) that they were supplied by the same eligible body, i.e. the University, as was making the principal supply of education; and
(ii) that the supplies of soft drinks were closely related to that principal supply of education.
The preliminary issue concerned whether condition (i) was satisfied. The tribunal answered this in the affirmative, but the grounds on which it relied provided no basis for that conclusion. The question turned primarily on the University's constitution, to which the tribunal paid little attention. Had it paid more, the only conclusion to which it could properly have come was that the Union was not an integral part of the University.
Accordingly, the soft drinks sold in the Union shop could not be regarded as supplied by the University, were not supplied by the eligible body making the principal supply of education and were not exempt from VAT.
Rimer J:
1. The University of Leicester ("the University") was established by a Royal Charter dated 1 May 1957. Clause 2 constituted the University as a corporate body and cl. 4 to 12 referred to various of its constituent bodies and officers. Clause 13 provided that:
… there shall also be a Students' Union. Such Union ("the Union") was established and performs the functions that students' unions usually perform. They include the sale of soft drinks to students from the Union shop in the University's Percy Gee Building.
2. The Union has been registered the purposes of Value Added Tax ("VAT") since April 1973. It has in the past accounted to the commissioners of Customs and Excise ("the commissioners") for output tax on the sales of soft drinks. In 1998, against background facts into which I need not go, it had a change of heart as to the correctness of this. On 30 September 1998, it wrote to the commissioners seeking the repayment of output tax totalling £26,450 for which it claimed to have "over-accounted" for the periods December 1995 to July 1998 in respect of its soft drink sales. It claimed that these supplies were exempt from VAT. The commissioners disagreed and on 11 December 1998 they informed the Union that they regarded the output tax as having been accounted for correctly. The Union disagreed with that decision and appealed against it to a VAT and duties tribunal (chairman, Mr DS Porter).
3. By a decision dated 11 August 2000, the tribunal determined in favour of the Union a preliminary issue arising on that appeal. By this appeal to the High Court, the commissioners challenge the correctness of that decision and ask that it be set aside. In order to identify the issue which was before the tribunal I must first refer to the relevant legislative provisions.
4. eu-directive 77/388 article 13AArticle 13(A)of the sixth Council directive (Directive 77/388) provides for the exemption from VAT for "certain activities in the public interest".
13(A)(1) Without prejudice to other Community provisions, member states shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:
-
…
(i) children's or young people's education, school or university education, vocational training or retraining, including the supply of services and goods closely related thereto, provided by bodies governed by public law having such as their aim or by other organisations defined by the member state concerned as having similar objects.
5. Value Added Tax Act 1994 section 31 subsec-or-para (1)Section 31(1) of the Value Added Tax Act 1994 ("VATA") provides that:
A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 9…
6. Value Added Tax Act 1994 schedule 9 group 6Group 6 of Sch. 9 to VATA, headed "Education", implementseu-directive 77/388 article 13(A)(1)art. 13(A)(1)(i)in domestic law. It provides, so far as material:
Item No.
1. The provision by an eligible body of-
(a) education;
(b) …
-
4. The supply of any goods or services (other than examination services) which are closely related to a supply of a description falling within item 1 (the principal supply) by … the eligible body making the principal supply provided-
(a) the goods or services are for the direct use of the pupil, student or trainee (as the case may be) receiving the principal supply;
(b) …
Notes:
(1) For the purposes of this Group an "eligible body" is-
…
(b) a United Kingdom university, and any college, institution, school or hall of such a university;
7. Value Added Tax Act 1994 schedule 9 group 6 schedule 9 group 6Items 1 and 4 of Grp. 6 are of direct relevance. I regard the interrelation between them as clear. It is undisputed that the University is an "eligible body" providing education and that its supply of such - the "principal supply" - is exempt from VAT. The soft drinks sold at the Union shop can only be similarly exempt if two conditions are satisfied, namely (i) they are supplied by the same "eligible body" - i.e. the University - making that "principal supply", and (ii) they are "closely related" to that principal supply. By its decision the tribunal held that the Union is "an integral part of the University", that it followed that it is an "eligible body" for the purposes of Value Added Tax Act 1994 schedule 9 group 6Grp. 6 and that is "party to" the principal supply of...
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