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HMRC internal manual

VAT Education Manual

Group 6 Item 1 Education, research and vocational training provided by eligible bodies: eligible bodies: universities and higher education institutions

Notes (1)(b) and (c) to Group 6 of Schedule 9 of the VAT Act 1994 define as eligible bodies UK universities and other centrally funded higher and further education institutions:

(b) a United Kingdom university, and any college, institution, school or hall of such a university;

(c) an institution -

(i) falling within section 91(3)(a) or (b) or section 91(5)(b) or (c) of the Further and Higher Education Act 1992; or

(ii) which is a designated institution as defined in section 44(2) of the Further and Higher Education (Scotland) Act 1992; or

(iii) managed by a board of management as defined in section 36(l) of the Further and Higher Education (Scotland) Act 1992; or

(iv) to which grants are paid by the Department of Education for Northern Ireland under Article 66(2) of the Education and Libraries (Northern Ireland) Order 1986

Note (1)(c) of Group 6 of Schedule 9 of the VAT Act 1994 includes as eligible bodies centrally funded higher and further education institutions. These include further education corporations that left local authority control on, or since, 1 April 1993. It also includes certain other further education organisations, such as the Workers’ Educational Association (WEA).

In the case of The School of Finance and Management Limited (SFM) (LON/99/193), the High Court upheld SFM’s argument that it was a college of a university. (A college of a university is an eligible body, and the education it supplies is exempt from VAT).

Certain institutions, principally universities, have the power to award degrees. Other bodies cannot award degrees but, if listed in education legislation, they can teach courses that lead to a degree.

At the time, SFM taught courses that led to degrees awarded by a particular university. The High Court concluded that the level of affiliation between SFM and the university was sufficiently close to make SFM a college of the university.

There would in my judgement be no objection had the United Kingdom imposed a different or more restrictive test, but, given that the test they have set down is one simply as to whether a particular college is a college of a university, I conclude that the tribunal was entitled, after weighing up the factors, to be influenced at the end of the day by the fact that the fundamental purpose of [SFM] is to provide education services leading to the award of a university degree by the university. 

We have accepted the decision on the facts of that particular case.

In two cases involving Robert Gordon University (RGU) [at Tribunal (V19317) and the Court of Sessions CSIH 22 XA124/0 RGU had a wholly-owned subsidiary called Univation which provided nursing and midwifery courses to NHS Scotland. As a subsidiary, RGU did not think it was an eligible body for VAT purposes and standard rated any supplies of training. Consequently, it could reclaim any VAT incurred in providing these services.

HMRC argued that the services supplied by the University to its subsidiary were in fact exempt education, stating that the ‘inter-position’ of the company had artificially distorted the true nature of the supply, and the supply should be viewed as if the company were not in place.

The tribunal and Court of Sessions ruled that RGU had correctly accounted for VAT, finding that the supplies to the subsidiary do not fall under any exemption (for example as supplies of education) and are thus standard-rated. The tribunal went on to say that if by organising transactions in a particular way an overall benefit in relation to tax can be achieved, [this] does not make the transaction unreal, and that the fact that a tax advantage arises as a result should not be decisive.