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In the University Of Southampton Students’ Union (USSU) First Tier Tribunal (FTT) case the issue was the VAT treatment of supplies of hot food and coffee; whether the appellant was an eligible institution making principal supplies of education or vocational training and/or whether supplies of hot food and coffee closely related to such principal supplies.
Background
USSU argued that both the supply of hot food and coffee by the USSU shop are exempt via The VAT Act 1994 Schedule 9, group 6, Item 4(a) and note 1(e) as supplies made by an eligible body which makes principal supplies of vocational training, and which are closely related to the (exempt) principal supply of education by the University of Southampton or vocational training by USSU. In the alternative, exemption applies for matters closely related to supplies of education by a third party via a published HMRC concession (and its supplies were within HMRC’s conditions for such a concession).
HMRC disagreed and claimed that these supplies were not closely related to education and that USSU was not an eligible body (no ring fencing of the profits such that they were not necessarily reinvested in its own supplies of education). Therefore, the supplies were properly taxable, and they declined to pay the appellant’s claim of overpaid output tax. The respondent also cited the Loughborough Students’ UnionUpper Tribunal (UT) case.
Decision
The appeal was dismissed for the
following reasons:
- USSU did not satisfy
the definition of vocational training
- the supplies of hot
food and coffee were not closely related to a supply of education or vocational
training
- USSU did not satisfy
the definition of an “eligible body”
Commentary
Superficially, the claim seemed
good. Para 5.5 of PN 709/1 states: “If you’re a student union and
you’re supplying catering (including hot takeaway food) to students both on
behalf, and with the agreement, of the parent institution, as a concession you
can treat your supplies in the same way as the parent institution itself. This
means that you can treat your supplies as exempt when made by unions at
universities.. This means that most supplies of food and drink made by the
union, where the food is sold for consumption in the course of catering will be
exempt… For example, food and drink sold from canteens, refectories and other
catering outlets (excluding bars), plus food and drink sold from vending
machines situated in canteens and similar areas.”
However, the Notice then goes on to add “But it does not
cover food and drink sold from campus shops, bars, tuck shops, other similar
outlets and certain vending machines…”
This appeal looks a close-run thing, but it demonstrates that
small differences in detail can produce different VAT outcomes. We urge all
Student Unions and other entities “attached” to education providers to review their
position.