Open University
| Jurisdiction | UK Non-devolved |
| Judgment Date | 03 June 2013 |
| Neutral Citation | [2013] UKFTT 326 (TC) |
| Date | 03 June 2013 |
| Court | First-tier Tribunal (Tax Chamber) |
[2013] UKFTT 326 (TC)
Judge Greg Sinfield
Paul Lasok QC and Owain Draper, counsel, instructed by KPMG LLP, appeared for the Appellant
Peter Mantle, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
VAT - whether services supplied by BBC to Open University exempt under the Sixth VAT Directive 77/388/EEC ("Sixth Directive"), eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i) - was BBC body governed by public law? - no - did BBC have educational aim required by Sixth Directive,eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i)? - no - was BBC other organisation defined by UK as having similar educational objects? - yes - held that services supplied by BBC to Open University were exempt under Sixth VAT Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i) - appeal allowed.
The First-tier Tribunal allowed the taxpayer university's appeal against HMRC's decision rejecting its claim for repayment of VAT charged on supplies of services made by another company. The company was not a body governed by public law and did not have the required educational aim for the purposes of Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i). However, the company's services were closely related to university education supplied by an organisation, other than a body governed by public law, that had objects similar to the required educational aim under Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i).
Between January 1978 and July 1994, a company ("BBC") charged and accounted for VAT on supplies of services to the taxpayer. The services consisted of the production and broadcasting of television and radio programmes relating to the taxpayer's courses. With effect from August 1994, HMRC accepted that the services supplied by BBC to the taxpayer were exempt under the Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 schedule 9 group 6Sch. 9, Grp. 6, item 4 as services closely related to the provision of education by a university. In 2009, BBC made a claim under VATA 1994, Value Added Tax Act 1994 section 80s. 80 for repayment of VAT that it had charged and accounted for on supplies made prior to August 1994. HMRC rejected the claim.
The claim for repayment of VAT was based on the contention that the supplies of services by BBC during the relevant period were exempt from VAT under Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i). That provision exempted services closely related to university education provided by bodies governed by public law having an educational aim or by other organisations defined by the member state concerned as having similar objects. That matter was previously considered in Open University (1982) VATTR 29, where the VAT Tribunal held that BBC's services did not qualify for exemption because it was not itself providing education. The decision was based on the premise that the person making the supply of closely related services should also be supplying education to the students. However, following the decision in Stichting Regionaal Opleidingen Centrum Noord-Kennemerland/West-Friesland (Horizon College) v Staatssecretaris van FinanciënECAS (Case C-434/05) [2010] BVC 281 ("Horizon College"), it became clear that the VAT Tribunal's premise was wrong.
The taxpayer contended that based on BBC's legal status during the relevant period, it was a body governed by public law for the purposes of Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i). It was not necessary for BBC, as a supplier of closely related services, to provide university education in order for it to have the required educational aim. BBC had the necessary aim in relation to all forms of education for the purposes of Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i). Relying on JP Morgan Fleming Claverhouse Investment Trust plc v R & C CommrsECAS (Case C-363/05) [2010] BVC 337, the taxpayer contended that BBC had objects that were similar to the provision of education and, accordingly, it fell within Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i) as an "other organisation having similar objects".
HMRC contended that BBC did not have the aim of providing such education in sense explained in Horizon College. The fact that BBC had an aim to provide educational content to the taxpayer's students did not mean that BBC had university education as one of its aims. Furthermore, the UK had discretion to recognise or not to recognise BBC as a body having similar objects to the required educational aim. The UK had simply not defined BBC as an "other organisation" for that purpose.
The Tribunal held that BBC was not similar to the state or any regional or local authority because it provided services to the taxpayer for consideration. In entering into an agreement with the taxpayer, BBC was not acting as part of the public administration of the UK. It was free to choose whether or not to provide services to the taxpayer and, having chosen to do so, it could agree how it would provide those services and at what cost. Furthermore, BBC was not a part of the public administration of the UK. It did not carry out a function of the UK Government. It did not administer the country or manage its interests. BBC enabled the taxpayer to implement the government's policy of widening access to university education, but did not itself implement that policy as an instrument of the government. Some of BBC's activities might be consistent with or further the government policy. However, BBC engaged in those activities because it chose to do so and not at the direction of the government. Thus, BBC was not a body governed by public law for the purposes of Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i).
BBC's educational broadcasts did not provide the necessary combination of teaching and organisational infrastructure, within which teachers transferred knowledge and skills to students. It provided only a part of the package and its educational broadcasts should always be complemented by the activities and infrastructure of other institutions, such as the taxpayer, in order to provide the viewers and listeners with education in the Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i) sense. Thus, BBC did not have the required educational aim.
However, Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i) only required other organisations defined by member states to have "similar objects". That wording suggested that the other organisations could have something other than "children's or young people's education, school or university education, vocational training or retraining" as described in Horizon College as their objects. Here, from its earliest days, BBC had education as one of its objects. The object was not simply education in a broad sense of information provided to the general public, but education aimed specifically at schools and adult further education colleges through targeted programmes designed to supplement the education of the pupils and students provided by the teachers. From the conception of the taxpayer, BBC also had university education as one of its aims. Its aim was not the provision of education in the Horizon College sense. However, it was close enough to such education to be a similar object. Thus, services supplied by BBC to the taxpayer during the relevant period were exempt being services closely related to university education supplied by an organisation, other than a body governed by public law, that had objects similar to the required educational aim under Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i).
This decision explains that the exemption from VAT under Sixth Directive, eu-directive 77/388 subsec-or-para A article 13art. 13(A)(1)(i) applies to two kinds of taxpayers - first, to the bodies governed by public law, who provide education in the Horizon College sense, and having such as their aim; and second, to other organisations defined by the member state concerned as having similar objects. To fall under the second category, the taxpayers must prove that their supplies of education must be close enough to the education in the Horizon College sense to be a similar object. For commentary on exemption for education under VATA 1994, Value Added Tax Act 1994 schedule 9 group 6Sch. 9, Grp. 6, see CCH British Tax Reporter at ¶28-000.
[1]This appeal concerns a claim for repayment of VAT charged on supplies of services made by the British Broadcasting Corporation ("the BBC") to the Open University ("the OU") during the period 1 January 1978 to 31 July 1994, excluding supplies made in the VAT period ending 30 September 1981.
[2]Between 1 January 1978 and 31 July 1994, the BBC charged and accounted for VAT on supplies of services to the OU. The services consisted of the production and broadcasting of television and radio programmes relating to OU courses. With effect from 1 August 1994, the Respondents ("HMRC") accepted that the services supplied by the BBC to the OU were exempt under item 4 of Value Added Tax Act 1994 schedule 9 group 6Group 6 of Schedule 9 to the Value Added Tax Act 1994 ("the VATA94") as services closely related to the provision of education by a university. In 2009, the BBC made a claim under Value Added Tax Act 1994 section 80section 80 the VATA94 for repayment of the VAT that it had charged and accounted for on supplies made prior to 1 August 1994. HMRC rejected the claim. This appeal has been brought by the OU as the recipient of the supplies made by the BBC. The BBC has agreed to pay any amount that it receives from...
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