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Background
Background
The FTT set out its detailed findings of fact at [16] – [145]. This is an appeal on point of law (section 11 Tribunals Courts and Enforcement Act 2007) and, save for the points discussed at paragraphs 54 to 57 below, the FTT’s findings of fact are not challenged in this appeal. It is, therefore, sufficient for the purposes of this appeal to summarise the facts as follows.
The Appellants were providers of higher education. Higher education is education which is part of an undergraduate or postgraduate degree course. Higher education includes Higher National Certificates (‘HNCs’) and Higher National Diplomas (‘HNDs’), also referred to as Level 4 and Level 5 qualifications, as well as degree courses, which are Level 6 qualifications. An HNC is equivalent to the first year of a degree course and an HND is equivalent to the second year of a degree course. Further education is post-secondary school education which does not include Level 4, 5 or 6 qualifications.
Providers of higher education include:
Higher Education Institutions (‘HEIs’), namely universities, colleges of universities, higher education corporations and other bodies designated by the Secretary of State for Education;
Further Education Corporations (‘FECs’) which also offer higher education courses; and
Alternative Providers (‘APs’), ie institutions offering higher education which are not HEIs or FECs:
Some providers of higher education have degree awarding powers (‘DAPs’) and/or university title, but not all do. The Appellants were APs which did not have DAPs or university title.
The main source of funding for all higher education providers was tuition fee funding. In many cases, tuition fees were paid by students using student loans provided by the Student Loan Company (‘SLC’). Student loans were available in respect of eligible courses provided by designated providers and designated courses provided by APs. HEIs were automatically treated as designated providers and all their eligible courses qualified for SLC funding. APs could apply for specific course designation and, if granted, students on those courses would qualify for SLC funding.
During the period relevant to this appeal, the Appellants provided higher education as follows:
St Patrick’s International College Limited (‘SPIC’) operated a further and higher education college in London supplying a range of HNCs and HNDs in business management, tourism and hospitality, technology and health and social care.
London College Of Contemporary Arts Limited (‘LCCA’) was a provider of further and higher education courses in fashion, visual arts, media, business and hospitality in partnership, from 2016, with South Thames College and Walsall College, both of which were providers of further and higher education.
Interactive Manchester Limited (‘IMAN’) offered undergraduate and postgraduate degree courses as well as HNC and HND courses, professional programmes and certain English language courses. It was divided into four schools: an accountancy school, a business school, an English language school and a vocational school. Until 2016, IMAN also provided courses in collaboration with the University of Wales (‘UoW’), London Metropolitan University (‘LMU’) and Grenoble Graduate School of Business (‘Grenoble’).
The Appellants considered that all or some of the supplies made by them should have been treated as exempt for the purposes of VAT. The Respondents (‘HMRC’) disagreed and issued various decisions and assessments for VAT relating to supplies made by the Appellants in the period 1 December 2012 to 6 August 2017. In 2019, the Appellants appealed to the First-tier Tribunal (‘FTT’).
There were originally five issues in the FTT but the FTT treated the first two as a single issue. In summary, the four issues were:
whether the UK’s implementation of Article 132(1)(i) PVD breached the EU principle of fiscal neutrality because the Appellants’ supplies of education were treated differently for VAT even though they were similar to supplies of education made by universities, colleges of universities and FECs;
whether supplies of education by SPIC and LCCA were exempt in any event under Item 5B of Group 6 of Schedule 9 VATA 1994 because the consideration payable for those courses was ultimately a charge to funds provided by the Secretary of State and, if so, whether the age restrictions in Item 5B were discriminatory and therefore in breach of EU law;
whether IMAN was a college of a UK university, namely UoW and LMU, and thus an “eligible body” within Note 1(b) of Group 6 of Schedule 9 VATA 1994; and
whether the fact that IMAN was an “eligible body” within Note 1(f) of Group 6 of Schedule 9 VATA 1994 because it taught English as a foreign language meant that all of its supplies of education were exempt.
In a decision released on 3 May 2023 with neutral citation [2023] UKFTT 00408 (TC) (‘the Decision’), the FTT (Judge Jonathan Cannan) dismissed the Appellants’ appeals, having found against them on all four issues. References in this decision to paragraphs in the Decision are in the form ‘[x]’.
In relation to issue (1), the FTT held that the Court of Appeal’s decision in Finance & Business Training Limited v HMRC [2016] EWCA Civ 7 (‘FBT CA’) established that Article 132(i) PVD was validly implemented in the UK by Notes 1(b) and 1(c) to Group 6 of Schedule 9 VATA 1994 and the UK was entitled to limit the exemption to specified bodies, namely universities, colleges of universities and FECs (see [156]). The FTT held, however, that FBT CA did not prevent the Appellants arguing that the principle of fiscal neutrality required that they be treated in the same way as the institutions mentioned in Notes 1(b) and 1(c) (see [157]). The FTT accepted HMRC’s submission that it is inherent in Article 132(1)(b) that similar or identical supplies of education will be treated differently and be taxable or exempt by reference to the supplier condition, ie that the supply must be made by a university, college of a university or FEC. The FTT concluded that the focus is not only on whether the supplies were similar from the perspective of the consumer, but also on whether the suppliers were comparable (see [175]). The FTT found that excluding the Appellants from exemption under Group 6 Schedule 9 did not breach of the principle of fiscal neutrality because the Appellants were not sufficiently similar to universities, colleges of universities and FECs. The FTT found that the regulatory regime for universities and colleges of universities was significantly stronger than the regulatory regime for APs with designated courses and these differences were not merely differences of detail, but differences of degree and substance (see [168] and [176]). The FTT found that the Appellants were not comparable to FECs because they were required to be charities by section 22A of the Further and Higher Education Act 1992 (‘FHEA’), with the result that they were non-profit making organisations, whereas the Appellants were not charities and were profit making institutions (see [177]).
In relation to issue (2), the FTT held that the supplies by SPIC and LCCA were not exempt by virtue of Item 5B of Group 6 of Schedule 9 VATA 1994 for three reasons:
The funds provided by the SLC did not fall within the phrase “ultimately a charge to funds provided by the Secretary of State” in Item 5B viewed in its historical context (see [188]);
the word “charge” in Item 5B implied a contractual liability on the part of the Secretary of State to pay the consideration payable to SPIC and LCCA for the courses and there was no such obligation in this case (see [189]); and
the VAT liability of the supply must be determined at the time of the supply and, at that time, it could not be known whether the student loan would be repaid and thus whether the Secretary of State would bear the cost of the education (see [191]).