St George's University Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 22 January 2021 |
| Neutral Citation | [2021] UKFTT 13 (TC) |
| Date | 22 January 2021 |
| Court | First-tier Tribunal (Tax Chamber) |
[2021] UKFTT 13 (TC)
Judge Greg Sinfield
Kieron Beal QC, instructed by PricewaterhouseCoopers LLP, appeared for the appellant
Mark Fell, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Education and vocational training – Identity of supplier – Place of supply – Exemption – Eligible body – Taxable amount – Value of supply.
The FTT concluded that the place of supply of medical training provided by a Grenadian University was outside the UK. Elements of the training were delivered to students in the UK by the University of Northumbria.
The St George's University (“SGU”) is established in Grenada, West Indies. It was accepted that it did not have an establishment in the UK for VAT purposes.
SGU provided medical training to students. Some of the training, including clinical training, was provided in the UK by University of Northumbria at Newcastle (“UNN”). In summary HMRC's view was that the place of supply of the education provided in the UK was the UK and that, because SGU was not an eligible body for the purposes of the education exemption, UK VAT was due on this element of the course.
The FTT first addressed the issues of (1) who supplied training to the students, and (2) what was the place of supply.
The FTT received detailed evidence from SGU which covered matters such as the way in which students applied to SGU, how students accepted onto the program in turn applied to study in the UK and responsibility for payment of tuition fees. The evidence also concerned the contract which existed between SGU and UNN.
On the basis of this detailed evidence (presented and discussed over para. 9–113) the FTT concluded that, in answer to the first question, the supplies made were as follows:
- SGU supplied the medical training to the students accepted onto the course in return for fees paid to it by those students.
- UNN supplied its services to SGU (and not the students), in return for payment made by SGU. Although UNN went through a process of accepting students and made some supplies direct to the students (e.g. accommodation), it was supplying education to SGU. The students did not pay tuition fees to UNN and the courses provided by UNN were, as a matter of economic reality, part of the supply of medical training made by SGU.
In reaching this conclusion the FTT considered, first, the contractual position as defined in the written contracts and then, second, whether this contractual analysis reflected the economic reality of the transaction (para. 72–73).
The FTT then considered the place of SGU's supply. It concluded that SGU made a single, complex supply, i.e. students purchased “medical training”, which should not be separated out into its different elements for VAT purposes. The place of supply of this single, complex supply was outside the UK, i.e. the tuition delivered in the UK by NUU should not be considered in isolation for place of supply purposes. At para. 143 the FTT stated “Where students choose to take part of the [medical training] in the UK, SGU's services are not the performance of the underlying educational activity but the provision to students of the opportunity to take part of the [medical training] in the UK and the organisation of the provision of education and training in the UK”.
This conclusion was sufficient to dispose of the appeal. In case it was incorrect on the place of supply issue, the FTT also considered whether, were it supplied in the UK, SGU's service would qualify for exemption and how it should be valued. The FTT ruled that exemption would not apply, as the education exemption is restricted to UK universities and not-for-profit bodies and SGU is neither (para. 179) and that were UK VAT due on the supplies, because SGU invoiced students termly, the consideration should be calculated by reference to the services supplied during each period covered by an invoice (para. 193).
This case affirms the importance of identifying “who is supplying what to whom” before VAT issues such as place of supply, liability and value can be addressed. It also affirms that, in approaching this question, the courts will first review the written contracts which are in place and then consider whether those contracts accurately reflect the underlying commercial and economic reality. Another example of this approach can be seen in the recent case of Wilmslow Financial Services plc (in liquidation) [2021] TC 07990
[1] The Appellant (“SGU”) is a university based in Grenada, West Indies. SGU offers a four year medical degree course called the Doctorate of Medicine (“the MD Course”). Students on the MD Course can opt to complete parts of the course in the UK. Some students opt to spend the first year of the MD Course in the UK on the Keith B Taylor Global Scholars Program (“GSP”) provided at the campus of the University of Northumbria in Newcastle (“UNN”). Some students also undertake their third and/or fourth year clinical training element of the MD Course in the UK (“the UK Clinical Training Programme”) at teaching hospitals run by various NHS Trusts (“the UK Teaching Hospitals”).
[2] In a decision dated 15 May 2017, and upheld in a review letter dated 15 February 2018, the Respondents (“HMRC”) determined that SGU was liable to be registered for VAT on the basis that it made taxable supplies of education to its students in the UK. HMRC decided that SGU was liable to account for VAT on the consideration paid or to be paid by the students in respect of the relevant academic years of study in the UK. SGU disagreed with HMRC's decision and appealed to the Tribunal under section 83(1)(a) and (b) of the Value Added Tax Act 1994 (“VATA 1994”).
[3] SGU and HMRC agreed that the appeal raised the following issues:
- Who supplies the GSP and the UK Clinical Training Programme to the students for VAT purposes?
- If SGU is the supplier of the GSP and/or the UK Clinical Training Programme, where is the place of supply for VAT purposes?
- If the GSP and/or the UK Clinical Training Programme are supplied by SGU in the UK, are those supplies taxable or exempt for VAT purposes?
- If the supplies are taxable, what is the taxable amount of the supplies for VAT purposes?
[4] In summary, SGU's primary case is that, in the light of the contractual and delivery arrangements, the relevant supplies of education and vocational training in the UK are made to the students by UNN and/or the NHS trust which operates the teaching hospital in question. HMRC contend that the contracts between SGU and the students, together with general commercial and economic realities, show that SGU supplies the GSP and the UK Clinical Training Programme to the students.
[5] If, contrary to its primary case, I find that SGU supplies the GSP and/or the UK Clinical Training Programme to the students, SGU argues that the place of supply of those services is Grenada. HMRC submit that the supplies are made in the UK because they are supplies of services relating to educational activities which actually occur in the UK.
[6] In relation to the third issue, SGU states that, if supplied in the UK, the supplies are exempt from VAT as the provision of education and vocational training by an eligible body. HMRC's position is that the supplies are not exempt because SGU is not a UK university or a college thereof. HMRC submit that the UK has lawfully exercised its discretion and powers to prescribe the bodies which can make exempt supplies of educational services and, having done so, supplies by a for-profit institution which is neither a UK university nor a college of one are not exempt.
[7] As to the question of the value of the supplies, SGU considers that the taxable amount of the supply is that part of the amounts paid by the students to SGU which SGU accounts for directly to UNN as course fees and to the UK Teaching Hospitals for the UK Clinical Training Programme. HMRC contend that VAT is chargeable on the full amount of the fees paid by the students to SGU for the academic terms in which the GSP and the UK Clinical Training Programme are supplied.
[8] For reasons set out below, I have concluded that SGU supplies the GSP and the UK Clinical Training Programme to the students but that such supplies take place in Grenada and are, accordingly, outside the scope of UK VAT.
[9] SGU served statements from six witnesses who described various aspects of the arrangements and produced contractual and related documents which I refer to below. The witnesses for SGU and the areas covered by their evidence were as follows:
- Nicholas Wilson is a Consultant Vascular and Paediatric Surgeon for the Hampshire Hospitals NHS Foundation Trust and also the Associate Dean of Clinical Studies UK and Associate Dean of Students UK for SGU. He gave evidence about the delivery of the UK clinical training programme to SGU students in the teaching hospitals.
- Ruth Crabtree is the Head of International Development for the Faculty of Health and Life Sciences at UNN. She described the relationship between UNN and SGU in relation to the GSP. She also gave evidence about the part played by UNN in admitting SGU students onto the GSP and in delivering the course.
- Kevin Robertson is the Faculty Associate Pro Vice-Chancellor (Learning and Teaching) at UNN. His evidence dealt with the introduction of the GSP at UNN and the quality assurance and accreditation processes of UNN in relation to the GSP.
- Joy Grenyer is the Head of Student Life at UNN and manages its Visa Compliance Team. She gave evidence about UNN's role and responsibilities as a Tier 4 sponsor of international students such as those on the GSP. She also explained the enrolment process for the GSP students.
- Joan Smith is the Director and Business Manager of St George's International School of Medicine Limited...
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