A European VAT decision concerning the VAT treatment of charges made by the college for meals prepared by students as part of their catering studies and for tickets to performances put on by students could be good news for private schools.
It is very common for catering colleges and establishments offering courses in beauty and hairdressing to offer services to the public to enable the students to practice their skills in a real life setting and generally the charges are set quite low just to recover costs because the students are still learning. Yet until now HMRC has always taken the view that these were business supplies made to the public liable to VAT in the same way as supplies made by any commercial enterprise would be.
However, the CJEU held that as these activities were for the students benefit, they were ancillary to the supply of the education to the students – exempt from VAT. The college was not in competition with commercial providers even though the product of the services were consumed and paid for separately by members of the public.
HMRC has still to comment on the case but there could be the opportunity to recover VAT accounted for in the past on these supplies. The downside would be the loss of related input tax so colleges who have invested in expensive training kitchens might need to take this into consideration. However, this is unlikely to be an issue for private schools charging parents for plays and performances put on by their pupils as there are few directly related costs and consideration should be given to submitting protective claims as soon as possible.
Please contact Ellen Main-Jeffrey or call your local office on 0845 177 5500 if you would like to discuss this further.