Wakefield College
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 January 2011 |
| Neutral Citation | [2011] UKFTT 70 (TC) |
| Date | 20 January 2011 |
| Court | First Tier Tribunal (Tax Chamber) |
[2011] TC 00948
[2011] UKFTT 70 (TC)
Richard Barlow (Tribunal Judge) (Chairman)
Mr Andrew Thornhill QC and Ms S Choudhury of counsel instructed by Deloitte and Touche LLP for the Appellant
Mr James Puzey of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
VAT - zero rate - construction of a building for a charity - business use? - yes - appeal dismissed. VAT - Art 13 of the Common System of VAT Directive - college of further education a body governed by public law? - no.
1. In this appeal Wakefield College appeals against the respondents' ruling given by letter on 23 May 2007 by which the respondents informed the appellant that they were "unable to accede to [the appellant's] request to issue a zero rating certificate for the construction of the new Glasshoughton Campus". It is not in dispute that that was an appealable decision amounting to a ruling that the supplies to the appellant by the construction company that built a new building for the appellant were not zero rated and had been correctly charged with VAT at the standard rate.
2. The building in question is called the skillsXchange (sic) and is a college building at Glasshoughton West Yorkshire where a large number of students of ages ranging from 14 upwards receive various forms of education and at which other related activities occur.
3. The appellant is a corporation established under the Further and Higher Education Act 1992.
4. The issues between the parties are twofold.
5. The first issue is the contention of the appellant that the construction supplies should have been zero rated under item 2 of Value Added Tax Act 1994 schedule 8 group 5Group 5 of Schedule 8 to the VAT Act 1994 which adds an item to the list of zero rated supplies and which, so far as is relevant, reads:
-
2 The supply in the course of construction of -
(a) a building … intended for use solely for … a relevant charitable purpose;
…
of any services related to the construction other than the services of an architect, surveyor or any person acting as a consultant or in a supervisory capacity.
NOTES
…
(6) Use for a relevant charitable purpose means use by a charity …
(a) otherwise than in the course of a business.
6. The respondents agree that the appellant is a charity in the relevant sense and that it intended to use and has used the building for a relevant charitable purpose but they dispute that it intended to or has used it "solely" for that purpose because they contend that the building was also used by the College in the course of business. Some of the activities of the College should be categorised as the operation of a business according to the respondents. The appellant contends that much of the College's activities were non-business activities and that, even though some of its activities might be characterised as business if conducted by a differently constituted legal entity, the nature of its funding, its mode of operation and its general characteristics were such that it was not in business at all so far as the activities intended to take place at the skillsXchange were concerned.
7. The second issue is whether or not the appellant was at the relevant time a "body governed by public law" in the sense required by Article 13 of the Common System of VAT Directive (2006/112). If so, the appellant contends that it was not to be regarded as a taxable person at all and so could not be conducting a business in the relevant sense. Mr Thornhill QC accepted at the hearing that that argument would not succeed on the current state of the law because the Chancellor had held in Cambridge University -v- Revenue and Customs Commissioners [2009] STC 1288 that a body governed by public law and which was not therefore to be regarded as a taxable person could nonetheless be engaged in economic activity (or seemingly, in terms of the UK legislation, as being in business). I have therefore been asked to rule whether the College is a body governed by public law so that, on any appeal which might arise from my decision, it would be open to the appellant to argue that the Cambridge University case was wrongly decided in so far as it decided that such a body could be in business even though not a taxable person.
8. The evidence presented at the hearing was extensive. I heard evidence from Jason Pepper, former director of finance of the appellant, George Tait Edwards MBE, a consultant formerly employed by various education funding bodies including the Learning and Skills Council ("LSC") and Professor David Reynolds CBE, Professor of Education at the University of Plymouth and advisor to government bodies in the education field. I also read the agreed statements of John Foster of the appellant and Neil License of the respondents. A very large number and volume of documents were also presented and referred to extensively at the hearing. The truthfulness of the witnesses' evidence was not in dispute and Mr Puzey's cross examination was aimed at elucidating rather than challenging the appellant's evidence. I should mention that Mr Puzey objected to the admissibility of a second witness statement produced by Professor Edwards shortly before the resumed hearing on the grounds that it had been served late. I ruled it should be admitted as evidence as it was relevant to the matters in dispute but on the basis that I would hear any application for an adjournment if Mr Puzey felt it necessary to have more time to take instructions after he had cross examined Professor Edwards. After cross examining Professor Edwards, Mr Puzey stated that he felt no such need and so no adjournment was sought.
9. As the issues in the appeal relate to how it was intended the skillsXchange building would be used the precise facts as they were at the date of completion are not necessarily determinative of the issue. However, the general nature of the activities carried on in the building has not changed substantially over time. My findings will not refer to precise sums of money, numbers of students and description of courses and my findings are directed to what the nature of the intended use of the building was. That is based on the approach taken by both parties at the hearing which was that the intentions of the College as to the use of the building can be derived from how it was in fact used. The general operation of the College as a whole in terms of the degree of control over it exercised by other bodies and the financing and economic realities of its operation are also relevant and again the precise day to day variations are not what is in issue rather the picture as a whole provides the relevant factual basis for my decision.
10. I find the facts to be as follows.
11. The College was incorporated in 1992 as the successor to Wakefield District College when further education colleges were taken out of Local Authority control and became corporate bodies under the Further and Higher Education act 1992. The College has over 10,000 students of whom 70% or so are part time. About 35% of the students are under 19. Most of the under 19s are full time students. Most of the older students are part time.
12. The students study a wide range of courses including vocational training for adults working towards National Vocational Qualifications, Skills for Life courses (basic courses in numeracy and literacy), apprenticeships where the College provides the off the job part of the training, business training courses for employers, leisure and pleasure courses in which participants learn what might be termed hobby subjects though these include useful skills such as computing and car maintenance, a Sixth Form College, foundation degree courses where the degrees are awarded by Universities but the teaching is done by and at the College and special vocational courses for younger students of 14 and upwards who are not succeeding at schools because of behavioural problems.
13. The building work for the skillsXchange began in May 2007 and it opened in February 2009. The work cost about £29,000,000 of which about 50% was received from the sale of the College's Whitwood campus and 36% from College reserves which were themselves mainly derived from the sale of another site. The European Social Fund paid just over £1,000,000 and the Learning and Skills Council provided nearly £2,000,000 as grant funding. Capital expenditure exceeding £1,500,000 by a Further Education College requires LSC approval. The governors of Wakefield College would not have gone ahead with the project without the financial contribution from the LSC.
14. The teaching at the College is funded mainly from public funds. In the year ending 31 July 2008 81% of the College's income was received as direct grant funding from the LSC and the Higher Education Funding Council for England ("HEFCE"). Much the larger part of that 81% is from the LSC. The HEFCE grant relates to some of the degree courses and some other degree course income is paid to the College by the degree awarding Universities which in effect sub-contract the teaching to the College often at surprisingly poor rates (typically the Universities may retain half the funding they receive even though the College provides all the teaching and all the University does is to set the curriculum and set and mark the examinations). Other grants are received from local authorities. Less than 10% of the funds are received from tuition fees paid by students or their employers.
15. The LSC grants include some for specific projects but they are mainly based on the planned number of students for the forthcoming year, an assessment of the College's success in previous years, the level of social deprivation in the catchment area and the level of additional learner support needed (which is based on students' prior achievements in state examinations).
16. The grant funding system operated by the LSC is...
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