International Students House
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 September 1996 |
| Date | 05 September 1996 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Allen Hall (1973) VATTR 161
Archer (No. 2) (1975) VATTR 1
Doom, Trustee of Truth for Youth Charity (1973) VATTR 61
Greene VAT(1974) VATTR 279; (1974) 1 BVC 1024
Hamann v Finanzamt Hamburg-Eimsbüttel VAT(Case 51/88) (1990) 5 BVC 32
McGrath VAT(MAN/88/87) No. 4368; (1989) 4 BVC 779
Namecourt Ltd VAT(LON/83/253) No. 1560; (1984) 2 BVC 208,028
Skatteministeriet v Henriksen VAT(Case 173/88) (1990) 5 BVC 140
The Lord Mayor and Citizens of the City of WestminsterVAT(LON/87/564) No. 3367; (1988) 3 BVC 847
Exemption - Land and buildings - Services related to the provision of education or vocational training - Charitable institution offering accommodation to overseas students - Grant of licence to occupy land - Whether "provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation" - Whether "used by or held out as being suitable for use by visitors or travellers" - Whether services of education or vocational training - Value Added Tax Act 1994 schedule 9 group 1 schedule 9 group 1Value Added Tax Act 1994, Sch. 9, Grp. 1, item 1(d) and Note (9); Value Added Tax Act 1994 schedule 9 group 6 schedule 9 group 6 schedule 9 group 6 schedule 9 group 6Grp. 6, item 1, 4 and 5 and Note (3); Directive 77/388, the sixth VAT directive, eu-directive 77/388 article 13(B)art. 13(B)(b)1; Leaflets 709/3/86 and 709/3/93.
The issues were (1) whether accommodation offered by the appellant to overseas students constituted exempt grants of licences to occupy land which did not amount to the provision in an hotel, inn, boarding house or similar establishment of sleeping accommodation; and (2) whether the services represented the provision by an eligible body of education or vocational training which was exempt.
The appellant was a charity, the aims of which were to contribute to better international relations by having students brought to the UK to experience life among the people in the UK and to give British students an opportunity to broaden their horizons through friendship with people from different backgrounds and cultures. It consisted of four buildings in central London containing 295 beds for single students in single, double and three-bedded rooms and 44 furnished flats for married students. The accommodation other than the flats was used during the vacations to house other students when not required by the residents.
Students selected for admission were expected to take part in a programme of activities and, in addition, the appellant provided counselling and welfare services. It did not provide formal education and none of its 110 members of staff were teachers but it offered what it regarded as an appropriate environment and a supporting academic programme. Admission was open to any individual affiliated to an educational or professional institute as a full time student or researcher and preference was given to those who wished to stay for a year or longer. Students paid a monthly rent inclusive of furniture and services. On leaving, a student was required to give 28 days' notice. The flats were let on a fixed-term tenancy and were granted for the express purpose of enabling the tenant to pursue a full-time course of study.
There were effectively students there all the year round, including those from outside universities such as the University of Wisconsin which held its "study abroad programme" with the appellant. Residents automatically became members of the International Students House Club of which there were also non-resident members. The appellant also ran a travel club which gave programmes and lectures and there was an active alumni association.
In 1987 Customs ruled that the appellant was an "independent hall of residence" and was not a "similar establishment" to an hotel so that its supplies were exempt. However, they later reconsidered their decision and ruled that the supplies which it made were covered by the exception from exemption provided by Value Added Tax Act 1994 schedule 9 group 1item 1(d) of Grp. 1 of Sch. 9 to the Value Added Tax Act 1994 and therefore standard-rated.
The appellant contended that it was fulfilling its mission by supplying accommodation, personal care, study facilities, cultural and leisure facilities and was therefore making mixed supplies of "education" and/or "vocational training", and granting licences to occupy land, both of which were exempt. It was a charity applying any profits which it made to continuing or improving its supplies. These were thus made to students or to eligible bodies within the meaning of Note (1) of Grp. 6 of Sch. 9 and these supplies were closely related to that body's supply of education.
The commissioners contended that the appellant provided sleeping accommodation suitable for use by visitors or travellers, the term "visitors" being given its normal meaning of someone who was away from home and "travellers" meaning people who were not residing. It was a "similar establishment" to an hotel, inn or boarding house, the word "similar" having a different meaning from that of "identical". They disputed that the appellant was making any supplies of education and maintained that there was no evidence that any vocational training was given. To come within the scope of Grp. 6 the principal supply had to be of education and while there was no doubt that the appellant's activities were valuable and instructive it had no teaching staff as such and was not providing "education".
Held, allowing the taxpayer's appeal:
1. The appellant was providing neither education within the meaning of item 1(a) nor vocational training within that of item 1(c) of Grp. 6. To benefit from these provisions it would have to be an "eligible body" but it was neither a school nor a university or hall thereof.
2. The appellant could not succeed under item 4 of Grp. 6 affording exemption to "The supply of any goods or services … which are closely related to a supply of [education]" since although Note (1) defined an "eligible body" as being one which was precluded from distributing any profit and which applied such profits as it made from education to the continuance or improvement of such supplies this could not be permitted to bear a meaning that applied more strictly to a body supplying education and less strictly to one making other supplies. It followed that the appellant's supplies could not be characterised as "education" within the meaning of Grp. 6.
3. By providing for the exclusion from exemption of "the provision of accommodation, as defined in the laws of the member states, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites" European law permitted the scope of the exclusion from exemption of the wording of the domestic legislation and this conformed with the general rules of the directive which made all taxable transactions subject to tax except where exemptions were expressly provided for.
4. The characteristics which distinguished "an hotel, inn, boarding house" from other types of establishment providing accommodation was the common purpose of the establishments described. This was accommodation per se as a business and did not fit the aims of the appellant which went far wider.
5. The question that then had to be asked was whether it was a "similar establishment", taking into account the fact that it was "the provision of sleeping accommodation", defined in Note (9) as including accommodation in premises "used by or held out as being suitable for use by visitors or travellers". These words had to be interpreted in their normal everyday English sense in their context. It could not be said that a person who travelled to the UK was automatically a visitor and traveller throughout his stay, however long he was in the UK. Further, the phrase implied an element of commercial exploitation which did not fit the description of the appellant's activities. It was a charity with particular aims and objectives, it exercised a degree of selectivity in and control over its residents and placed emphasis on corporate existence. The provision of accommodation was subsidiary to its main purpose of helping overseas students and improving international relations.
[The tribunal set out the facts summarised above and continued as follows.]
On this evidence the appellant says that International Students House makes exempt supplies, as its supplies are all within Sch. 9 to theValue Added Tax Act 1994 as being either education or land. The appellant says that International Students House is a registered charity, with the purposes earlier set out, and that it fulfils its mission inter alia through the supply of accommodation, personal care, study facilities, cultural and leisure facilities. It is precluded from distributing profits and applies profits made from those supplies to continuing or improving the supplies. Thus the supplies made by International Students House amount to a mixed supply of "education" and/or "vocational training", and accommodation. Supplies are thus made to students, or to eligible bodies within the meaning of Sch. 9, Grp. 6, Note (1). Where a supply is made to an eligible body, that supply is closely related to that body's supply of education.
The commissioners accept that the appellant provides study space, library space and pastoral care and other activities. The appellant therefore says that education is being provided in the broad sense of the word, that International Students House came within Note (1)(e) of Grp. 6 of Sch. 9 as an eligible body, and that moreover in accordance with Note (3) vocational training of a charitable nature was being given, for example in relation to Christmas parties, and that in accordance with Note (4) examination services were being offered to the...
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