Wakefield College v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 December 2011 |
| Neutral Citation | [2011] UKUT 495 (TCC) |
| Date | 20 December 2011 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2011] UKUT 495 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Arnold J.
Kevin Prosser QC (instructed by Deloitte LLP) for the appellant.
James Puzey (instructed by the Solicitor for HMRC) for the respondents.
Value added tax - Zero-rating - Construction - Charity - Education - New building - Supply in course of construction of building intended for use solely for relevant charitable purpose - Whether building to be used by charity otherwise than in course of or furtherance of business - Whether business use de minimis - Whether provision of education to certain students a business for VAT purposes - Taxpayer's appeal allowed - Case remitted to First-tier Tribunal - Value Added Tax Act 1994, Sch. 8, Grp. 5, Value Added Tax Act 1994 schedule 8 group 5item 2.
This was an appeal by the taxpayer from a decision of the First-tier Tribunal ([2011] UKFTT 70 (TC); [2011] TC 00948) that the construction of a new building did not qualify for zero-rating for VAT purposes under the Value Added Tax Act 1994, Sch. 8, Grp. 5, item 2 because it had been used for business rather than charitable purposes.
The taxpayer was a charity. It provided education to over 10,000 students. It offered a range of full-time and part-time courses, including apprenticeships, for students aged 14 or over. Over 80 per cent of its income was in the form of grants from funding councils and less than 10 per cent of its income was in the form of tuition fees paid by students or their employers. The students could be divided into three groups: (i) those who qualified for a full grant, representing about 73 per cent of the total; those students did not pay any tuition fees; (ii) students who qualified for a reduced grant, representing about 11 per cent of the total; they or their employers were expected to pay a proportion of the fees for their courses; (iii) students who did not qualify for any grant and who paid the full cost of their courses, representing about 16 per cent of the total. There was no dispute that the provision of education to the first group of students did not constitute a business for VAT purposes. Nor was there any dispute that the provision of education to the third group of students did constitute a business for VAT purposes. There was a dispute as to whether the provision of education to the second group of students constituted a business for VAT purposes or not.
The taxpayer constructed a new building called the skillsXchange. HMRC ruled that the construction of the building by the taxpayer did not qualify for zero-rating for VAT purposes under the Value Added Tax Act 1994, Sch. 8, Grp. 5, item 2 as "the supply in the course of construction of (a) a building … intended for use solely for … a relevant charitable purpose", "a relevant charitable purpose" being defined by Note (6) as "use by a charity … otherwise than in the course or furtherance of a business". The taxpayer appealed arguing that the building was being used otherwise than in the course or furtherance of a business and that in providing further education the taxpayer was acting as a public body and so was not a taxable person for VAT purposes at all. The FTT dismissed the appeal ([2011] UKFTT 70 (TC); [2011] TC 00948). The taxpayer appealed on the ground that the term "solely" in Sch. 8, Grp. 5, item 2 could accommodate a de minimis margin of five per cent business use and the FTT had failed to determine whether the extent of business use of the building was de minimis or not.
Held, allowing the appeal and remitting the case to the First-tier Tribunal:
1.The FTT had not been referred to HMRC's Business Brief 39/09 (issued on 1 July 2009) which indicated HMRC's view to the effect that the term "solely" in Sch. 8, Grp. 5, item 2 could accommodate a de minimis margin of five per cent business use. It had wrongly proceeded on the basis that the taxpayer's appeal should be dismissed if the building was put to any business use at all, however small, whereas it should have gone on to decide whether the extent of the business use was de minimis or not. It had erred in law and the case had to be remitted to decide that issue.
2.The better view was that the FTT addressed but failed to decide whether the provision of education to the second group of students was a business for VAT purposes. Given that the matter had to be remitted on the de minimis issue, the FTT would be able to make clear what its decision was on that point in the light of such further argument as it deemed appropriate.
Arnold J: Introduction
1.This is an appeal from a decision of the First-Tier Tribunal (Tax) (Tribunal Judge Richard Barlow) ("the Tribunal") dated 20 January 2011 ([2011] UKFTT 70 (TC); [2011] TC 00948) dismissing the appeal of Wakefield College ("Wakefield") against a ruling of the Commissioners for Her Majesty's Revenue and Customs ("HMRC") in a letter dated 23 May 2007 to the effect that the construction of a new building called the...
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Wakefield College
...in the hearing. Summary The decision was supplementary to those previously given by the FTT [2011] TC 00948 and the Upper Tribunal [2012] BVC 1513. The appeal was remitted by the latter for the FTT to reconsider its jurisdiction in relation to the application of the de minimis principle app......