An important VAT decision for charities in the education sector

HM Revenue & Customs (HMRC) has changed its policy following the 4 May 2017 decision by the Court of Justice of the European Communities in Brockenhurst College [2017] EUECJ C-699/15. The change is good news for the education sector and many colleges will be entitled to a significant VAT refund.


The policy of HMRC had previously been that sales to members of the public from, for example, beauty/ hairdressing salons, restaurants and theatres that are run for the purpose of providing students with a better education could never qualify for exemption from VAT.

HMRC now accepts that exemption will normally apply if the following conditions are all met:
  1. The activities must be carried on for the purpose of providing students with a better education. For example, restaurant/catering services that are provided for the purpose of providing students on a catering course with a better education should satisfy this condition. There are many other examples, including beauty/hairdressing salons where the services are provided to members of the public by students.
  2. The activities must not have the purpose of generating additional income in direct competition with commercial enterprises.
  3. The education or vocational training the activities relate to must be funded by VAT exempt fees rather than by grants.

The above conditions are relevant to the VAT treatment of the activities going forward as well as to whether there is entitlement to a VAT refund for a four year period.

Please contact the Garbutt + Elliott VAT team if you would like to know more.

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