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HMRC internal manual

VAT Education Manual

Group 6 Item 4 Shops Run by Student Unions

University of Leicester Students’ Union (“ULSU”) ([2001] EWCA Civ 1972)

 

ULSU operated a shop from which it made various supplies, including soft drinks, to students. It sought a repayment of VAT paid on those supplies which it contended qualified for exemption as closely related goods or services to supplies of education made by the University.  The High Court held that ULSU was a separate entity from the university and not an integral part of it, such that its supplies could not be regarded as made by the University (an eligible body).

The Court of Appeal confirmed that ULSU was not a college, institution, school, or hall of a university under Note 1(b) of Group 6 of Schedule 9 to the VAT Act 1994.  Peter Gibson LJ (with whom Morland J agreed) noted that the common characteristic of entities coming under Note 1(b) was that they were all suppliers of education.  However, ULSU did not make the principal supplies and so its supplies could not meet the conditions for exemption in Item 4 of Group 9.  Arden J disagreed with Peter Gibson LJ, but also held that ULSU was not within note 1(b) for a different reason.  The reason was that ULSU had no academic links with the University and no academic recognition.  She held that links of a pastoral or recreational character or for the purpose of providing student representation were insufficient to meet Note 1(b).  The Union’s appeal was accordingly refused.

These issues were further litigated in Loughborough Students’ Union.

 

Loughborough Students’ Union (“LSU”) Upper Tribunal (UT/2017/0166)

 

Loughborough University was established by Royal Charter in 1966. LSU was also an entity that was separate from the University and separately VAT registered.  As well as the University, LSU was also the students’ union for two other educational bodies, Loughborough College and the RNIB Vocational College. 

LSU carried on various commercial activities including operating three retail outlets, a shop on the University campus, one in the campus village and another on the College campus. The shop sales included stationery, art materials and other items.  Although most of the customers were students, there was no restriction on others using the shops.

LSU argued that it was an eligible body under Note 1(e) to Group 6 of Schedule 9 to the VAT Act 1994.  The FTT had found that LSU did not make any supplies of education or vocational training for consideration and so its shop sales could not qualify for exemption under Item 4 of Group 6. 

The UT held that Note 1(e) could not be looked at in isolation to decide whether Group 6 properly implemented the Directive exemption.  It was necessary to look at the conditions for exempting supplies under Group 6 as a whole.  When that was done, it was clear that exemption under Item 4 was firmly linked to education and vocational training.  LSU was not the body making the principal supply and there were no evidence that any of the supplies it made were closely related to a principal supply of education.  This was also the conclusion of Peter Gibson LJ in University of Leicester Student’ Union (referred to above).  Again, the Union’s appeal was refused.