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Susan Shi
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Were the sums received from the government funding agencies grants, or payments for services? Charities, and those providing education in particular, may find the outcome of this dispute helpful to keep in mind when reviewing their own activities.
Associate
Colchester Institute Corporation (“CIC) v. HMRC
As background, the taxpayer was a Further Education college, which provided education and training to students. Students either paid for their courses personally, or their education was funded by two government funding agencies (the Skills Funding Agency (SFA) and the Education Funding Agency (EFA)).
The dispute was over whether the sums received from the government funding agencies were grants, or payments for services. Were the supplies of education and training “supplies of services for consideration”?
The First Tier Tribunal concluded that the sums received from the government agencies were a “block grant”, which had been provided subject to conditions. The funding was not consideration paid for a supply of services.
However, the Upper Tribunal disagreed.
Therefore the Upper Tribunal concluded that there was a “direct link” between the grants coming into the CIC and the courses provided to the CIC’s students for free. The CIC’s provision of grant-funded education was a VAT exempt supply of education services.
This case highlights that an activity that is 100% grant funded is not automatically a non-business activity. Charities, and those providing education in particular, may find this helpful to bear in mind when reviewing their own activities.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of March 1, 2021.