No VAT exemption for Student Union shop supplies

Fri 09 Nov 2018

In the case of Loughborough Students’ Union (LSU) v HMRC the Upper Tribunal (UT) has confirmed the decision of the First tier Tribunal (FTT) that sales of stationery, art materials and other items from LSU campus shops did not qualify for the education VAT exemption and were therefore standard rated.

In order to succeed, LSU needed to show its supplies fell within VATA Sch9 group 6 item 4 as being:

• for the direct use of pupils, students….receiving the principal supply, or;
• where the supply is to an eligible body making the principal supply, it is made by another eligible body.

Note 1(e) to the schedule indicates an eligible body only has to be prevented from distributing its profits and has to use its profits to continue or improve its supplies. While it was accepted that LSU was an eligible body, it was not itself making ‘principal supplies’ (education supplies), nor was it supplying goods to another eligible body making such applies (its supplies were directly to the students).

The UT agreed that note 1(e) could be read as meaning that an eligible body did not have to make principal supplies of education to be an eligible body for this purpose. It might therefore be broader than intended by the Principal VAT Directive (PVD) articles 132-134.  There was not, however, any evidence of the LSU supplies meeting the requirements of item 4.

Comment

While this case might be seen as an attempt to push the boundaries of interpretation of the education VAT exemption, it does illustrate a potentially broader access to the education exemption under the UK rules than might be expected from the PVD.

For a further discussion of the VAT issues of supplies connected with education, please get in touch with a member of the Mazars indirect tax team.