Further education colleges — VAT

The First-tier Tribunal has decided that certain students of further education colleges are treated as receiving their tuition ‘free of charge’, and thus not giving rise to a business activity. The point is important, since it could mean that the scale of business activities of such colleges is sufficiently low that new buildings can be constructed on a VAT-free basis (although this depends upon the detailed mix of the colleges’ activities).

Wakefield College (TC03108) argued that students who made only part payment towards their fees, owing to means testing, should not be regarded as purchasing the services in the course of what is called an ‘economic activity’. This is based directly on a previous European court decision in the case of Finland (C-246/08) in which the Court of Justice of the European Union (CJEU) decided that such payments were not consideration for supplies on the basis that they made such a small contribution to the cost, and were geared to ability to pay rather than to what was actually consumed…

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