The Chancellor, Masters and Scholars of the University of Cambridge v Her Majesty's Revenue & Customs, V 20610
| Jurisdiction | UK Non-devolved |
| Judge | A Edward SADLER |
| Judgment Date | 12 March 2008 |
| Respondent | Her Majesty's Revenue & Customs |
| Appellant | The Chancellor, Masters and Scholars of the University of Cambridge |
| Reference | V 20610 |
| Court | First-tier Tribunal (Tax Chamber) |
20610
Value added tax – Article 13, Council Directive of 28 November 2006 (2006/112/EC) – whether Article 13 has effect to treat the Appellant as not carrying on an economic activity – no – whether the Appellant is a body governed by public law for the purposes of Article 13 – no – whether the Appellant engages in activities as a public authority in providing higher education – no – whether the Appellant, as a charity, uses fuel or power otherwise than in the course or furtherance of a business within Group 1 of Schedule 7A, Value Added Taxes Act 1994 – no - appeal dismissed
THE CHANCELLOR, MASTERS AND SCHOLARS
OF THE UNIVERSITY OF CAMBRIDGE
Appellant
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Tribunal: EDWARD SADLER (Chairman)
MISS SHEILA WONG CHONG FRICS
Sitting in public in London on 10 – 12 December 2007
Andrew Hitchmough and James Rivett, counsel, instructed by the Appellant
Raymond Hill, counsel, instructed by the General Counsel and Solicitor for HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2008
DECISION
Introduction-
This is an appeal by The Chancellor, Masters and Scholars of the University of Cambridge (“the Appellant”) against a decision of the Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) given in their letter of 1 September 2005 to refuse to allow the Appellant to issue a certificate entitling it, under the provisions of Group 1, Schedule 7A to the Value Added Tax Act 1994 (“VATA”), to pay a reduced rate of VAT on supplies made to it of electricity.
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The Appellant’s case can be summarised as follows:
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As a charity it is entitled to pay the reduced rate of VAT on electricity supplies made to it if it uses the electricity “otherwise than in the course or furtherance of a business”;
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In the present case the electricity was used by the Appellant in the course or furtherance of providing higher education to degree level;
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The Appellant is a body governed by public law by reason of its statutory foundation and the public powers entrusted to it and, in providing education, is acting as a public authority by reason of the statutory regime under which it is governed and the funding and other regulations with which it must comply, so that it is not to be regarded as a taxable person in relation to its activities of providing education, by reason of Article 13 of the Council Directive of 28 November 2006 (“the 2006 VAT Directive”);
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If the Appellant is not a taxable person, then it is not (by reason of the definition of “taxable person” in Article 9 of the 2006 VAT Directive) carrying out any economic activity;
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If in providing higher education the Appellant is not carrying out any economic activity, it is not then acting in the course or furtherance of a business;
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Accordingly, the electricity used by the Appellant in the course or furtherance of providing higher education is used “otherwise than in the course or furtherance of a business”, and the Appellant is entitled to pay the reduced rate of VAT on the supplies of such electricity made to it.
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The Commissioners’ case can be summarised as follows:
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Article 13 of the 2006 VAT Directive has more limited scope than the Appellant asserts: by providing that a body governed by public law is not regarded as a taxable person in respect of activities in which it is engaged as a public authority Article 13 looks only to the question of the supplies made by the public body when it is so engaged – in effect it treats them as outside the scope of VAT, or as exempt; specifically, Article 13 does not look to the question of whether the activities in which the public body is engaged are economic activities and is therefore not relevant to the entitlement of the public body to recover VAT at a reduced rate on input supplies; accordingly, Article 13 does not have effect to entitle the Appellant to claim reduced rate VAT on electricity supplies it receives on the ground that the electricity is used “otherwise than in the course or furtherance of a business”;
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Notwithstanding its statutory foundation, the Appellant is not a “body governed by public law” as that expression is to be understood for the purposes of Article 13 of the 2006 VAT Directive, so that even if Article 13 were in point, the Appellant would not be within its ambit;
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The Appellant, in providing education, does not engage in activities “as a public authority” since it does not operate under a special legal regime, so for that reason also the Appellant is outside the ambit of Article 13.
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There are, therefore, essentially three issues requiring our decision:
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Is it correct to interpret and apply Article 13 of the 2006 VAT Directive so that a body within its ambit engaged in activities within its ambit is treated for VAT purposes as not carrying on an economic activity when it engages in those activities? This is a question of law. We refer to it as “the Article 13 issue”.
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Is the Appellant a “body governed by public law” for the purposes of Article 13 of the 2006 VAT Directive, and hence within the ambit of Article 13? It is a question of law as to what comprises a “body governed by public law” for the purposes of Article 13, and a question of fact as to whether the Appellant has the required characteristics. We refer to this as “the public law body issue”.
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Is the Appellant, in providing higher education, engaging in activities “as a public authority” for the purposes of Article 13 of the 2006 VAT Directive, and hence engaging in activities within the ambit of Article 13? It is a question of law as to what comprises engaging in activities “as a public authority” for the purposes of Article 13, and a question of fact as to whether, in providing higher education in its particular manner and circumstances, the Appellant meets the relevant requirements. We refer to this as “the special legal regime issue”.
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If the Appellant fails on the Article 13 issue its appeal must be dismissed. If the Appellant succeeds on the Article 13 issue, then in order to succeed in its appeal it must succeed on both the public law body issue and the special regime issue.
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As mentioned below, we were asked to give a decision in principle. Our decision is as follows:
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The Appellant is not a “body governed by public law” for the purposes of Article 13 of the 2006 VAT Directive;
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If, contrary to our decision, the Appellant is a “body governed by public law” for such purposes, it is not, in providing higher education, engaging in activities “as a public authority” for the purposes of Article 13 of the 2006 VAT Directive;
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If, contrary to our decision, the Appellant is a “body governed by public law” which, in providing higher education, is engaging in activities “as a public authority” for the purposes of Article 13 of the 2006 VAT Directive, Article 13 does not have the effect that, when it engages in such activities, the Appellant is to be treated for VAT purposes as not carrying on an economic activity;
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Therefore in providing higher education the Appellant is acting “in...
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