Commissioners of Customs and Excise v School of Finance and Management(London) Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 30 November 2001 |
| Date | 30 November 2001 |
| Court | Chancery Division |
Chancery Division.
Burton J.
Jeremy Hyam (instructed by the Solicitor for Customs and Excise) for Customs.
Jonathan Peacock QC and Jolyon Maugham (instructed by Dibb Lupton Alsop) for the taxpayer.
The following cases were referred to in the judgment:
Blasi v Finanzamt München I VAT(Case C-346/95) [1998] BVC 247; [1998] ECR I-481
Bulthuis-Griffioen v Inspecteur der Omzetbelasting VAT(Case C-453/93) [1996] BVC 106; [1995] ECR I-2341
C & E Commrs v Annabel's Casino Ltd VAT[1995] BVC 65
C & E Commrs v Civil Service Motoring Association LtdVAT[1998] BVC 21
C & E Commrs v University of Leicester Students' UnionVAT[2001] BVC 252
EC Commission v France (Case C-76/99) [2001] ECR I-249
Edwards (HMIT) v Bairstow ELRTAX[1956] AC 14; (1956) 36 TC 207
Fitzpatrick v Sterling Housing Association Ltd ELR[2001] 1 AC 27
Marleasing SA v La Comercial Internacional de Alimentación SA(Case C-106/89) [1993] 1 CEC 124; [1990] ECR I-4135
Pilgrims Language Courses Ltd v C & E CommrsVAT[1999] BVC 328
R v Westminster City Council, ex parte A [1997] 9 Admin LR 504
Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiën VAT(Case 348/87) [1991] BVC 102; [1989] ECR 1737
Victor Chandler International Ltd v C & E CommrsWLR[2000] 1 WLR 1296
Value added tax - Exemption - Eligible body - University - College - Taxpayer provided education to fee paying overseas students leading to award of university validated degree - Whether taxpayer was eligible body for purposes of VAT exemption - Whether taxpayer was college of UK university - Whether supply of degree-level courses exempt for VAT - Value Added Tax Act 1994, Sch. 9, Grp. 6, item 1, Note (1)(b) -Council Directive 77/388, art. 13(A)(1)(i).
This was an appeal by Customs against a decision of the VAT and Duties Tribunal (No. 17,182; [2001] BVC 2284) that the School of Finance and Management (London) Ltd ("SFM") was eligible for exemption as a college of a university under Value Added Tax Act 1994 schedule 9 group 6Note (1) to Grp. 6 of Sch. 9 to the Value Added Tax Act 1994.
The taxpayer was in the business of providing degree-level education to fee-paying overseas students, leading to the award of a validated degree from the University of Lincolnshire and Humberside. Customs took the view that the taxpayer's provision of education, research and vocational training, as an eligible body, was exempt from VAT under VATA 1994, Value Added Tax Act 1994 schedule 9 group 6Sch. 9, Grp. 6. It was later discovered that the taxpayer had been incorrectly applying VAT to its sales. It therefore sought to reclaim the VAT accounted for amounting to £251,285.27. The reclaim led to a further review by Customs and they rejected the claim for repayment on the ground that the taxpayer did not qualify as an "eligible body" under Sch. 9, Grp. 6. The VAT tribunal decided that it was satisfied that the fundamental purpose of the taxpayer was to provide education services leading to the award of a university degree. Therefore it could be described as a "college of a university", and hence qualified as an eligible body, so that it was exempt from VAT. Customs appealed to the High Court.
Customs argued that the exemption in eu-directive 77/388 article 13 subsec-or-para Aart. 13(A)(1)(i) of the sixth directive comprised two different categories of suppliers of education, the first being bodies governed by public law with education as their aim and the second being other organisations with similar objects (as defined by member states). Value Added Tax Act 1994 schedule 9 group 6Note (1)(b) of Sch. 9, Grp. 6 referred to the first category and Note (1)(e) to the second. Therefore to qualify for exemption the body supplying education had to be governed by public law or fall within the "other organisation" category. The UK Government had exercised its discretion under eu-directive 77/388 article 13 subsec-or-para Aart. 13(A)(2)(a) to grant the education exemption to non-public law bodies subject to their aim not being systematically to make and distribute a profit. Customs submitted that the taxpayer qualified within neither category. Further, considering theeu-directive 77/388 article 13 subsec-or-para Aart. 13(A)(1)(i) exemption, the taxpayer, as a profit-making organisation, did not have similar objects.
Held, dismissing Customs' appeal:
1. Customs' primary case was rejected. Note (1)(b) did not require that an eligible body should be governed by public law. It might be that Note (1)(b) (and also (1)(a), (c) and (d)) at least primarily related to public law bodies and Note (1)(e) (and (1)(f)) to those that were not, but there was insufficient linkage between 1(b) and 1(e) to found the bedrock of Customs' argument that the dichotomy within eu-directive 77/388 article 13 subsec-or-para Aart. 13(A)(1)(i) of a public law body and other defined organisations was reflected by a dichotomy in Notes (1)(b) and (1)(e); nor to reach the conclusion that the UK had made an eu-directive 77/388 article 13 subsec-or-para Aart. 13(A)(2)(a) condition as to non profit-making in relation to every organisation other than those governed by public law. Whereas it was right that such a condition could only be applied to non-public law bodies, it did not follow that it must be assumed to have been made in respect of all non-public law bodies.
2. The issue was therefore whether the taxpayer was or was not a college of a university which could be recognised if it was not defined. A balancing exercise was the correct approach. As no words were to be read into Note (1)(b), the tribunal was amply entitled to decide that, on the facts of this case, the taxpayer was a college of the university. The tribunal was entitled, after weighing up the factors, to be influenced at the end of the day by the fact that the fundamental purpose of the taxpayer was to provide education services leading to the award of a university degree by the university. Accordingly, the taxpayer qualified for exemption from VAT on its supplies of degree-level education to fee-paying overseas students since it was a "college of a university" and an eligible body within Value Added Tax Act 1994 schedule 9 group 6Sch. 9, Grp. 6, item 1, Note (1)(b).
Burton J:
1. This is an appeal by the Commissioners of Customs and Excise ("the appellants") against a decision of the VAT and Duties Tribunal (Peter Lawson (Chairman) and Tony Ring) given on 9 April 2001 ((2001) BVC 4131), after a two day hearing on 19 and 20 February 2001, concluding that the School of Finance and Management (London) Ltd ("SFM") was eligible for exemption as a college of a university under Value Added Tax Act 1994 schedule 9 group 6Note (1) to Grp. 6 of Sch. 9 to the Value Added Tax Act 1994 ("VATA 1994").
2. The background to the hearing before the tribunal is succinctly set out in the opening paragraphs of the decision, which, for convenience, I repeat:
1. The formal background to this appeal is as follows.
2. … SFM…registered for VAT with effect from 1 January 1996. [Its] business is the provision of degree-level education to fee-paying overseas students leading to the award of a University of Lincolnshire and Humberside ("ULH") validated degree.
3. Following correspondence between [SFM's] accountants and the commissioners, the commissioners confirmed by letter dated 11 December 1998 that [its] provision of education was exempt under [VATA 1994] Sch. 9, Grp. 6. After this, it was discovered that SFM had been incorrectly applying VAT to its sales. SFM therefore, through its accountants, by letter dated 1 February 1999 reclaimed VAT accounted for on its returns made for periods 05/96 to 08/98 amounting to £251,285.27.
4. The reclaim led to a further review by the commissioners of the position and by letter dated 18 February 1999 they rejected the claim for repayment on the grounds that SFM does not qualify as an "eligible body" under Sch. 9, Grp. 6 … The appeal is against that rejection.
5. On 9 July 1999 the commissioners issued an assessment for £765,013 estimated underdeclared VAT on sales for the period 1 January 1996 to 28 February 1999.
6. [SFM] was originally part of the EW Fact plc group of companies ["EWFG"] which was acquired in June 1998 by Nord Anglia Education plc. The trading activities of SFM were transferred to Kingswood College Ltd, an eligible body within the Nord Anglia VAT group, on 25 February 1999.
7. Witness statements were made by [the] finance director of Nord Anglia group, by John Graham Carr, until 31 January 2001, when he retired, director of professional and academic training of Nord Anglia Education plc, and by Professor George Cecil Corfield BSc, PhD, who worked for 14 years at ULH and held various posts including that of dean of faculty and director of quality, and was a member of the vice-chancellor's management team.
3. The prospectus of SFM at the material time commenced, after a foreword from the vice-chancellor of ULH, "[SFM] is an Associate College of [ULH] and is also part of [EWFG]". The prospectus refers to the degree of master of business administration ("MBA"), "the "premier" qualification for today's aspiring senior managers". It states that "the 12 month MBA is a part of [ULH's] International Modular Masters in Management Programme".
4. Prior to summer 1996 degrees for students at SFM were awarded by the University of Hull. A memorandum of co-operation ("MOC") between SFM and ULH, which was never in the event signed but treated as the basis of the agreement between them, was then effective instead from summer 1996. The material parts of the MOC read as follows:
By this memorandum of co-operation between…[ULH] (the University) in partnership with…SFM, SFM will offer a range of programmes as outlined below. This agreement covers the programmes (below) delivered through University approved SFM centres world-wide.
There is a list of programmes, including...
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