Loughborough Students' Union v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 31 October 2018 |
| Neutral Citation | [2018] UKUT 0343 (TCC) |
| Date | 31 October 2018 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2018] UKUT 0343 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mrs Justice Rose
Noel Tyler (VATAngles VAT Consultancy) appeared for the appellant
Joseph Millington, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Exemption – Education – Sales from student union campus shops – VATA 1994, Sch. 9, Grp. 6 – Directive 2006/112 (the Principal VAT Directive), art. 132–134 – Eligible body – Closely related supplies – Union's appeal dismissed.
The Upper Tribunal (UT) dismissed the Union's appeal against the decision of the First-tier Tribunal (FTT) ([2017] TC 05966) that exemption did not apply to sales (supplies) of goods by its shops, because it had imprecisely identified the goods, i.e. merely describing them as “including sales of stationery and art materials etc” and they were not closely related to the supply of education.
Loughborough Students Union (LSU) claimed repayment of VAT charged on supplies of stationery, art materials and other items by its shops.
LSU claimed that it was entitled to the education exemption under Directive 2006/112 (the Principal VAT Directive), art. 132(1)(i), so its supplies to students of such goods were supplies closely related to providing education.
The FTT rejected LSU's appeal and held that, although LSU's stated primary objective was the “advancement of education of students at the university”, that does not necessarily mean that the economic and operational reality of its activities was that it provided “educational services”. The LSU represented about 16,000 students, of whom 14,803 used its services and 8,541 actively engaged in student activities. The FTT decided that LSU's objectives and activities were:
- representing students by promoting and supporting the students' general interests;
- creating and promoting a good social, cultural and sporting life; and
- providing appropriate pastoral support for its members.
Such items failed to meet the test of being objectives similar to bodies governed by public law, having as their aim the provision of university education or vocational training or retraining. Thus, the FTT held that the LSU was not an organisation that was entitled to exemption.
That was sufficient to dismiss, the LSU's appeal, but in case LSU appealed to the UT, the FTT went onto consider whether the sale of goods from its shops could be exempt. The FTT held that VATA 1994, Sch. 9, Grp. 6, item 4 had not accurately implemented art. 132–134. Thus, the LSU was entitled to the direct effect of art. 132(1)(i) regarding the closely-related goods. However, the FTT held that the LSU did not meet the conditions in that provision, because the LSU's claim was insufficiently precise to identify the goods that the LSU wanted to exempt.
On appeal, the UT held that, whether or not the LSU was an eligible body within Sch. 9, Grp. 6, Note (1)(e), exemption applied only if its supplies were within one of the Grp. 6 items, i.e. item 4, being closely-related supplies.
The UT held that the LSU's supplies failed to fit with Grp. 6, item 4. LSU had imprecisely identified the goods, i.e. describing them as “including sales of stationery and art materials etc.”. The burden of proof was on LSU to do so.
Also, the UT held that the supplies were not “closely related” to the provision by an eligible body of education or vocational training, as the supplies were “ends in themselves”, rather than ancillary to education. Although there was a possibility that the art materials could be treated as closely related to education or vocational training, the LSU had failed to provide enough evidence to show they were within the narrowly defined term of closely related supplies.
In addition, the supplies were within item 4 only if they were supplied “by or to the eligible body making the principal supply”. The goods were not supplied to an eligible body (Loughborough University), but to students.
Further, the UT rejected the claim that the goods were supplied by an eligible body, as the on-the-job training that the LSU provided to the students, who ran the shop, bars and sporting events, was not a principal supply within Grp. 6 (para. 2 of the Decision).
Also, the LSU claimed that it was enough for closely-related supplies made by an eligible body (which makes principal supplies) to be closely related to a principal supply made by another eligible body, and that the UK law was unduly restrictive. The UT held that it did not need to consider this claim, as the LSU did not make a principal supply (para. 24 of the Decision).
Thus, the UT held that the LSU's supplies failed to fall within any of Grp. 6's items, whether or not it was an eligible body under Note (1)(e) (para. 26 of the Decision). The LSU's appeal was dismissed and the supplies were not exempt.
The UT reached the expected decision. As the exempt Groups are exceptions to the general requirement to standard-rate all supplies, they are narrowly interpreted.
[1] This is an appeal by Loughborough Students Union (“LSU”) against a decision of the First-tier Tribunal (Judge Peter Kempster) released on 23 June 2017 dismissing its appeal against HMRC's decision to deny its claim for repayment of output tax in respect of sales of stationery, art materials and other items from the shops which LSU operates on campus. LSU maintains that the sales were exempt supplies for VAT purposes and that those supplies had mistakenly previously been treated as standard rated. LSU argues that it is entitled to exemption on the basis of the domestic VAT legislation properly construed. They do not rely on the direct effect of the underlying articles in the Principal VAT Directive (Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, OJ L 347, 11.12.2006 p1) (“PVD”) although they rely on a number of decisions of the Court of Justice of the European Union when inviting this Tribunal to construe the domestic provisions in their favour. HMRC seek to uphold the dismissal of the appeal although they disagree with some of the reasons given by the FTT, in particular the criticisms of the drafting of the domestic provisions and the FTT's conclusion that the VAT Act 1994 failed properly to implement the PVD in important respects.
[2] The agreed facts are set out in [3]–[6] of the FTT's decision. Loughborough University was established in 1966 by Royal Charter. The statutes of the University state that there shall be a Students' Union of the University and the Ordinances provide for “the constitution, functions, privileges and other matters” relating to the LSU. LSU is an entity separate from the University and is separately VAT registered. LSU is also the Union for students from two other educational establishments, Loughborough College which is a further education college and the RNIB Vocational College.
[3] Clause 2(a) of LSU's Constitution set out its objects:
The Union's objects are the advancement of education of Students at Loughborough University, Loughborough College and the RNIB Vocational College (Loughborough) for the public benefit by:
- enriching and enhancing the educational experience of its members as people as well as...
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Step by Step (Northern Ireland) Ltd
...Commrs v Brockenhurst College (Case C-699/15) [2017] BVC 20 and that of the Upper Tribunal in Loughborough Students' Union v R & C Commrs [2018] BVC 521. [59] The recent decision of the Upper Tribunal in Colchester is both relevant and binding on me. Colchester Institute Corporation (“CIC”)......