The Commissioners for HM Revenue and Customs v SAE Education Limited
| Jurisdiction | UK Non-devolved |
| Judge | Judge Bishopp,Judge Brannan |
| Neutral Citation | [2016] UKUT 0193 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,25 April 2016 |
| Date | 25 April 2016 |
| Published date | 01 December 2016 |
[2016] UKUT 0193 (TCC)
Appeal ref: UT/2014/0070
VALUE ADDED TAX — exempt supplies — education — PVD arts 131-133 —
Note (1)(b) Item 1 Gp 6 Sch 9 Value Added Tax Act 1994 — whether education
provided by “eligible body” — whether respondent a college of a university — tests to
be applied — role of the Upper Tribunal — appeal allowed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Appellants
- and -
SAE EDUCATION LIMITED Respondent
Tribunal: Judge Colin Bishopp
Judge Guy Brannan
Sitting in public in London on 1 and 2 December 2015
Sarabjit Singh, counsel, instructed by the General Counsel and Solicitor to HM
Revenue and Customs, for the appellants
Melanie Hall QC and Elizabeth Kelsey, counsel, instructed by Gordon Dadds LLP
for the respondent
CROWN COPYRIGHT © 2016
2
DECISION
Introduction
1. This is an appeal by Her Majesty’s Revenue and Customs (“HMRC”)
against a decision of the First-tier Tribunal (“the F-tT”) (Judge Clark and Dr
James MBE) by which they allowed the appeal of the present respondent, SAE 5 Education Limited (“SEL”), against various assessments to VAT, covering the
periods from 1 May 2009 to 29 February 2012 and amounting to about £1.3
million. The F-tT also allowed SEL’s appeal against some related penalties,
imposed because of SEL’s failure to register for VAT. The details are unimportant
for present purposes. 10
2. The underlying question is whether supplies of education made by SEL are,
as it contends, exempt or, as HMRC maintain, standard-rated. The answer to that
question depends in turn upon whether SEL is to be treated as an “eligible body”
within the meaning of Note (1)(b) to Item 1 of Group 6 of Schedule 9 to the Value
Added Tax Act 1994 (“VATA”). 15
3. The starting point for the consideration of that issue is arts 131 to 133 of the
Principal VAT Directive (Council Directive 2006/112/EC) (“the PVD”). Article
131 sets the scene:
“The exemptions provided for in Chapters 2 to 9 shall apply without
prejudice to other Community provisions and in accordance with conditions 20 which the Member States shall lay down for the purposes of ensuring the
correct and straightforward application of those exemptions and of
preventing any possible evasion, avoidance or abuse.”
4. Chapter 2 includes art 132.1 which, so far as relevant to this appeal,
provides that: 25
“Member States shall exempt the following transactions: ...
(i) the provision of children’s or young people’s education, school
or university education, vocational training or retraining,
including the supply of services and goods closely related
thereto, by bodies governed by public law having such as their 30 aim or by other organisations recognised by the Member State
concerned as having similar objects ….”
5. Article 133 expands on art 131 by providing some examples of the
conditions Member States might impose. Those given relate to bodies which do
not set out to make profits, or whose charges are regulated by the state, and they 35 allow the Member State to refuse exemption if it would lead to distortion of
competition. The United Kingdom has not chosen to implement the exemption of
educational provision in quite that way, and in particular has not limited the
exemption of educational supplies to non-profit making bodies; others may also
make exempt supplies of education provided they fall within the UK’s 40 implementation of the description “other organisations recognised by the Member
State concerned as having similar objects” to those of bodies governed by public
law.
3
6. The term used in UK law for such an organisation is “eligible body”. Thus
the relevant part of art 132(1) is reflected in Item 1 of Group 6, which provides for
the exemption of:
“The provision by an eligible body of—
(a) education ….” 5
7. The meaning of “eligible body” is given by Note (1). It lists a number of
such bodies, but it is common ground that the only relevant description in this
case is that to be found in paragraph (b):
“a United Kingdom university, and any college, institution, school or hall of
such a university.” 10
8. SEL’s original case was that it was a non-profit making organisation
(which, if correct, would have brought it within the scope of paragraph (e) of Note
(1)), but it later abandoned that case (which the F-tT said, at [205], they would
have rejected in any event) and argued instead that it satisfied paragraph (b)
because it is, or at the material time was, a college of Middlesex University 15 (“MU”), and the question whether it was such a college was, in substance, the
only issue in the appeal. The F-tT, after a lengthy consideration of a considerable
volume of evidence and numerous authorities relating to the interpretation of the
statutory requirements, concluded that SEL was right, that it was throughout the
period assessed a college of MU, and that its supplies of education were 20 correspondingly exempt. They therefore discharged the assessments and the
penalties. HMRC now challenge their conclusion, essentially on the basis that the
F-tT’s finding that SEL was a college of MU and therefore an eligible body was
not one open to it on the evidence interpreted in accordance with the relevant
authorities. 25
9. Before us, HMRC were represented by Mr Sarabjit Singh and SEL by Mrs
Melanie Hall QC, leading Ms Elizabeth Kelsey. In what follows, numerals in
square brackets, unless otherwise indicated, are references to the corresponding
paragraphs of the F-tT’s decision.
The facts 30
10. We take the following summary of the facts from the F-tT’s decision
supplemented by an examination of several documents to which we were taken
during the course of the hearing. The primary facts are in any event the subject of
only limited controversy; rather, the question is the interpretation to be placed
upon them. We shall deal with some additional matters of detail when we come to 35 the parties’ arguments.
11. SEL is a wholly-owned member of the SAE corporate group, whose origins
are Australian; “SAE” is taken from the initials of the School of Audio
Engineering. The SAE group was acquired by the Navitas Group in early 2011. It
has continued to trade worldwide, commonly as “SAE Institute”, in the provision 40 of education and training in audio and digital media technologies and production.
It began trading in the UK in 1985. At that time the UK trading entity was SAE
Education Trust Ltd (“SETL”), a subsidiary of a Dutch member of the group. In
early 2009, for reasons of which we are unaware, SETL found itself in some
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