In Colchester Institute Corporation (CIC) v HMRC [2024] UT397, the Upper Tribunal (UT) found that government funding provided to a college constitutes an economic activity for VAT purposes. In this unusual case, HMRC agreed that their appeal should be dismissed but reserved the right to appeal to the Court of Appeal, maintaining that the decision in CIC v HMRC [2020] UKUT 0368 was incorrect. 
- Colchester Institute Corporation (CIC) is a further education college providing courses within the meaning of education and vocational training. It is funded by tuition fees paid by students and government grants.
- CIC constructed new buildings, costing £40 m of which £12.5m was government funded.
- HMRC's stance was that CIC could Reclaim input tax on the new buildings proportionate to their non-business usage.
- Subsequently, CIC would need to account for Deemed output tax over the economic life of the buildings to the extent of their non-business usage.
- HMRC considered that when government-funded, the supply of education and vocational training is a non-business activity.
- HMRC raised an Assessment in respect of output tax underdeclared.
- CIC Appealed to the FTT, which found that irrespective of government funding, the supply of education and vocational training is a business activity for VAT. The supplies were provided in exchange for consideration; they fall within the scope of economic activity.
- HMRC Appealed to the Upper Tribunal (UT) on the basis that the provision of education or training was not for consideration, the grants paid to CIC were not directly linked to the provision of education or training.
The Upper Tribunal (UT) found:
- Colchester Institute Corporation v HMRC [2020] UKUT 0368 (CIC 2020) dealt with the same consideration issue in respect of the same material facts.
- The reasoning in that decision, which held in CIC’s favour on the consideration issue, applies equally to the materially similar facts of this appeal.
- The FTT was accordingly correct to find CIC succeeded on the consideration issue and to allow CIC’s appeal.
The UT dismissed the appeal.
Editor's comment
HMRC agreed that its case should be dismissed but reserved their right to appeal to the Court of Appeal (CoA).
- In CIC 2020, HMRC lost on the consideration issue but succeeded in setting off input tax to extinguish CICs repayment claim. They maintain that the decision in CIC 2020 was wrong.
- As HMRC won the appeal, it could not appeal the UT’s on the consideration issue.
- Instead, HMRC intends to appeal to the CoA. This is a unusual case, in effect by-passing the UT, but the tribunal has agreed to this approach to judicial resources.
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Funded education is an economic activity
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External Links
Colchester Institute Corporation v HMRC [2024] UT397
