Edinburgh Telford College v HM HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 February 2006 |
| Docket Number | No 29 |
| Date | 22 February 2006 |
| Court | Value Added Tax Tribunal |
Court of Session Inner House First Division
Lord President (Hamilton), Lady Cosgrove, Lord Clarke
Revenue - Value added tax - Provision of publicly funded fee paying courses - Whether college so doing engaging in activities or transactions as a public authority for VAT purposes - EU Directive 77/388, Arts 2, 4, 6(2), 17, 17(5), 18
Article 4(5) of EU Directive 77/388 provides, inter alia, that states, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions. When they engage in such activities or transactions, they are to be considered taxable persons in respect of these activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition.
The appellants appealed against a decision of the Edinburgh VAT and duties tribunal upholding a decision of Her Majesty's Commissioners of Revenue and Customs to the effect that the appellants in providing its funded core courses was operating under a private law regime and that Art 4(5) did not have the effect of making the appellants (a college of further education) a non-taxable person for value added tax purposes. The core activities in question comprised provision of further education courses within the Scottish qualifications framework levels 4 to 8 funded by the Scottish Education Funding Council in relation to which the appellants collected fees. It was accepted by the respondents that for the purposes of the Directive the appellants were a body governed by public law.
The commissioners cross-appealed the tribunal's determination that where the appellants engaged in non-business, taxable and exempt activity it was entitled to immediate deduction of the total input tax charged on construction costs of the campus. The appellants did not oppose that appeal.
Senior counsel for the appellants argued that in providing funded further education courses under the direction of the Scottish Ministers and the Funding Council, the appellants operated under a special regime applying only to further education colleges and to the extent that they were funded by public money to supply certain kinds of education. In relation to their core activities they were not acting under the same legal conditions as a hypothetical private trader providing a similar service. The issue was not as the tribunal had found whether or not the agreement between the appellants and the student who undertook the courses in question was governed by contract law with private remedies available to the parties. The contractual relationship between the appellants and their students was largely regulated by statute and dictated by the funding authority.
Junior counsel for the respondents argued that, notwithstanding the appellants' position as a public authority for the purposes of the directive, the relevant supplies of education were not made subject to a special legal regime applicable to the appellants and were therefore not within the ambit of Art 4(5). The existence of a public law framework governing the exercise of private law activities did not necessarily convert the activity into one involving the use of public powers.
Held that the tribunal had erred in focusing exclusively on the nature of the relationship between the college and the individual student and that the college in providing funded fee-paying courses was engaging in activities or transactions as a public authority for VAT purposes (paras 25-27); and appeal and cross-appeal allowed.
Edinburgh Telford College appealed against a decision of the Edinburgh VAT and duties tribunal dated 18 January 2005 upholding assessments issued by the Commissioners for Her Majesty's Revenue and Customs. The commissioners were called as respondents and cross-appealed in relation to part of the decision.
The cause called before the First Division, comprising the Lord President (Hamilton), Lady Cosgrove and Lord Clarke, for a hearing.
Cases referred to:
Commission v UKUNK C-359/97; [2000] ECR I-6355; [2000] STC 777
Fazenda Pública v Cámara Municipal do PortoUNK [2000] ECR I-11435; [2001] STC 560
Lennartz v Finanzamt München IIIUNK [1991] ECR I-3795; [1995] STC 514
Radio Authority (The) v Customs and Excise Commissioners (1992) 2 VATTR 155
Rhondda Cynon Taff County Borough Council v Customs and Excise CommissionersVAT [2000] V & DR 150; [2000] BVC 2226
Ufficio Distrettuale delle imposte dirette di Fiorenzuola d'Arda and ors v Comune di Carpaneto Piacentino and orsUNKENR 231/97 and 129/88; [1989] ECR 3233; [1991] STC 205
West Devon Borough Council v Customs and Excise CommissionersUNK [2001] STC 1282
At advising, on 22 February 2006, the opinion of the Court was delivered by Lord Clarke-
Opinion of the Court-
[1] These are two appeals, one at the instance of Edinburgh Telford College and the other at the instance of the Commissioners for Her Majesty's Revenue and Customs against a decision of the Edinburgh VAT Tribunal dated 18 January 2005. The college has conceded that the commissioners' appeal should be allowed and the parties have reached an agreement as to the manner in which the issues between them should be disposed of, apart from the matter which is the subject of the college's appeal.
[2] The case involves the proper treatment of input tax charged in relation to the construction of a new campus for the college, the works in respect thereof having commenced in or about October 2002. The appeals involve a consideration of both the relevant domestic and European legislation regulating VAT. Ultimately, however, the main point in issue is to be resolved by a consideration of the relevant European legislation and the case law relating thereto.
[3] Section 4 of the VAT Act 1994 provides as follows:
'(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.
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(2) A taxable supply is a supply of goods or services in the United Kingdom other than an exempt supply'.
Section 24 of the 1994 Act provides as follows:
'(1) Subject to the following provisions of this section "input tax", in relation to a taxable person, means the following tax, that is to say-
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(a) VAT on the supply to him of any goods or services;
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(b) VAT on the acquisition by him from another member State of any goods; and
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(c) VAT paid or payable by him on the importation of any goods from a place outside the member States,
being (in each case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him.
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(2) Subject to the following provisions of this section, "output tax", in relation to a taxable person, means VAT on supplies which he makes or on the acquisition by him from another member State of goods (including VAT which is also to be counted as input tax by virtue of subsection (1)(b) above).
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(3) For the purposes of subsections (1) and (2) above, where goods or services are supplied to a company, goods are acquired by a company from another member State or goods are imported by a company from a place outside the member States and the goods or services which are so supplied, acquired or imported are used or to be used in connection with the provision of accommodation by the company, they shall not be treated as used or to be used for the purposes of any business carried on by the company to the extent that the accommodation is used or to be used for domestic purposes by-
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(a) a director of the company, or
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(b) a person connection with a director of the company.
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(4) The Treasury may by order provide with respect to any description of goods or services that, where goods or services of that description are supplied to a person who is not a taxable person, they shall, in such circumstances as may be specified in the order, be treated for the purposes of subsections (1) and (2) above as supplied to such other person as may be determined in accordance with the order.
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(5) Where goods or services supplied to a taxable person, goods acquired by a taxable person from another member State or goods imported by a taxable person from a place outside the member States are used or to be used partly for the purposes of a business carried on or to be carried on by him and partly for other purposes, VAT on supplies, acquisitions and importations shall be apportioned so that only so much as is referable to his business purposes is counted as his input tax'.
Section 25 of the 1994 Act provides as follows:
'(1) A taxable person shall-
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(a) in respect of supplies made by him, and
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(b) in respect of the acquisition by him from other member States of any goods,
account for and pay VAT by reference to such periods (in this Act referred to as "prescribed accounting periods") at such time and in such manner as may be determined by or under regulations and regulations may make different provision for different circumstances.
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(2) Subject to the provisions of this section, he is entitled at the end of each prescribed accounting period to credit for so much of his input tax as is allowable under section 26, and then to deduct that amount from any output tax that is due from him.
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(3) If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the output tax then, subject to subsections (4) and (5) below, the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners; and an amount which is due under this subsection is...
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