College VAT victory brings hope of multi-million pound windfall

Colleges could be in line for a multi-million pound VAT windfall with a tribunal judge having ruled against Her Majesty’s Revenue and Customs (HMRC) over a Hampshire training restaurant.

Brockenhurst College was awarded around £55,000 after it was found the supplies for its on-site training restaurant, MJ’s, were integral to educating students — and so should have been exempt from VAT.

The figure represents a refund of four years’ worth of tax paid to HMRC on supplies to the 50-seater training restaurant, which is staffed by students and open to the public.

it will be interesting to see if other FE colleges also investigate.”

And with more than 160 colleges in England operating similar facilities, plus other training enterprises such as hair salons, spas and theatres, successful payback campaigns in the vein of Brockenhurst’s could therefore net the college sector tens of millions of pounds.

Principal Di Roberts said the money would be pumped back into the college, although a HMRC spokesperson told FE Week the ruling was being considered “carefully, before deciding whether to appeal further”.

Among England’s colleges with a training restaurant is West Nottinghamshire College. Its restaurant, called Refined, is the most highly-rated in Mansfield on
A spokesperson for the college said: “We are aware of the Brockenhurst case.

“We are reviewing any potential impact for the college with our professional VAT advisors as there is significant complexity in the recoverability of output taxes — that is on food and drink served — charged for ‘spin-off’ services whereby the liability of these types of activity will depend on the category of student who delivers the service.”

A spokesperson for Westminster Kingsway College, which runs award-winning Vincent Rooms restaurant, said: “It’s something that we will be looking into, but we’re waiting for legal advice.”

A Middlesbrough College spokesperson said it would also investigate claiming back on its Waterside Brasserie.

And the Association of Accounting Technicians (AAT) encouraged other colleges to investigate.

Brian Palmer, AAT tax policy adviser, said: “While we are not surprised as the argument the college put forward makes perfect sense, it is pleasing to see the college put its case forward and other FE colleges may be incentivised to do the same.

“It would serve FE colleges in their best interest to relook at their supply chains.

“In the current economic climate where funds are tight, receiving a rebate could make all the difference to a college… it will be interesting to see if other FE colleges also investigate.”
He added: “Brockenhurst College argued the restaurant supplies were exempt by virtue of being part of the education and vocational training for the hospitality students — quite rightly, in much the same way as we argue that concerts and performances given by students as part of their educational course are also exempt.

“The absence of a profit element (to the supplies) demonstrated an intention to supply education, rather than commercial catering or entertainment provision.”

Julian Gravatt, assistant chief executive at the Association of Colleges, said VAT law was “very complicated”.
“This case revolves around the way in which VAT exemptions apply in cases where students are providing services as part of their education,” he said.

“Any savings in VAT that colleges make are reinvested for the benefit of students, so the latest tribunal decision seems to be a positive step forward.”


After weeks and months of talk of cuts it’s great to get news of some money heading the college sector’s way thanks to a training restaurant VAT victory.

The possibility of HMRC rebates running into the tens of millions of pounds may amount to relatively little at the individual college level, especially in comparison to the amounts that will be lost when 18-year-olds are funded at 17.5 per cent less than their 16 and 17-year-old classmates, but even the smallest of graces should be welcomed.

To what extent this rebate applies to other college training enterprises will determine the size of any potential repayments, but hopefully they can go some way to helping alleviate funding concerns in these straitened financial times.

Congratulations should go to the Brockenhurst College accountant who spotted the issue.

It seems a fair bet that they’re the toast of the college, not to mention the sector, right now.

Chris Henwood, editor


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