The case marks the end of a long running legal battle involving Brockenhurst College Case [C 699/15], which has already been argued at an Upper Tribunal and at the Court of Appeal, which made the referral to the CJEU.

The college is a higher education establishment which offers courses in catering and hospitality and in the performing arts. In order to provide practical experience, the college runs a restaurant and stages performances for audiences from outside.

These are open to a limited public composed of people who have registered in a database in order to receive newsletters informing them of such events.

Those people are informed that the events are offered as part of the students’ education and at a reduced price which, in relation to the meals, covers approximately 80% of the cost. If the restaurant bookings do not meet a minimum of 30 servings, the meal is cancelled.

During the relevant period, the college paid VAT at the standard rate on the price charged for the meals and entertainment services supplied, but then sought to challenge this. Although the Upper Tribunal found in favour of the college, HMRC took the case to the Court of Appeal.

The Court of Appeal then asked the CJEU to rule on whether the supplies of restaurant services and entertainment services made by an educational establishment to paying members of the public (who are not recipients of principal supply of education)  could be seen as ‘closely related’ to the provision of education in circumstances where the making of those supplies is facilitated by the students (who are recipients of principal supply of education) in the course of their education and as an essential part of their education.

The CJEU has now also found in favour of the college, arguing that the restaurant and entertainment services provided are open only to people previously registered on a mailing list, and were usually family and friends of students.

The training restaurant is available only by reservation and upon the condition that it be fully booked. Thus, meals are cancelled if the required threshold is not reached, unlike in a commercial restaurant where reservations are in principle unconditionally honoured.

Since the meals are offered at 80% of cost price, it could not be said that the college was attempting to make money out of the enterprise.

Lastly, it is clear from the information provided by the referring court that the concerts, performances and restaurant services are entirely organised, carried out and supplied by students enrolled at the college.

This is a situation which is fundamentally different from that of students undertaking an internship in a commercial entity, where they join a professional team supplying such services in the competitive conditions prevailing in the respective markets.

The CJEU concluded: ‘Consequently, the services offered by the college to a limited number of third parties do not appear to be comparable to those offered by commercial restaurants and theatres, and the exemption from VAT for services supplied by the college does not amount to a difference in tax treatment.’

David Wilson, VAT technical associate director at RSM, said the decision reversed  HMRC’s longstanding position that, as the provision of meals, and attendance at theatrical performances, were supplies to the general public, they should be subject to VAT at the standard rate.

‘Having local colleges providing VAT free restaurant services may be seen by some commercial operators as competition, with the resulting likelihood being further calls for a VAT reduction in the hospitality and catering sectors. In apparently recognising such, the CJEU acknowledges that it would be for the national courts to determine if there is any distortion of competition resulting from treating such supplies as exempt from VAT,’ Wilson said.

He also pointed out that, given his binding judgment of the CJEU, colleges, schools and the public may benefit from other supplies made as part of vocational training courses: for example, hair and beauty salons, or car repairs, as these could also be considered as services ‘closely related’ to the supply of education, and would, subject to competition rules, also be exempted from VAT.

The ruling in Case C 699/15, REQUEST for a preliminary ruling under Article 267 TFEU from the Court of Appeal (England & Wales) (Civil Division) (United Kingdom), in the proceedings Commissioners for Her Majesty’s Revenue & Customs v Brockenhurst College, is here

Pat Sweet