Constable VAT Focus 23 May 2023


VAT registration helpline
From 22 May 2023, HMRC have closed the VAT registration helpline. This line was assisting taxpayers with VAT registration applications; however, HMRC have confirmed that over 85% of the calls were from taxpayers seeking an update on the progress of their VAT registration application. Taxpayers can now make use of the ‘Where’s my reply’ tool rather than making phone calls, allowing HMRC to allocate resources more efficiently and processing more applications. Taxpayers should expect a reply to VAT registration applications within 40 workings days.

Fuel and power (VAT Notice 701/19)
This above guidance provides information about the VAT treatment of supplies of fuel and power to both suppliers and users. Clarification of the requirement for certificates by charities has been added.

Claim a VAT-related payment if you buy second-hand motor vehicles in Great Britain and export them to the EU for resale
The above guidance sets out how to use the second-hand motor vehicle payment scheme to make a claim if you are VAT registered in the EU. Information has been added as you must keep records showing that at the time you exported the vehicle to an EU country, you were registered for VAT in that country, for claims you make on your UK VAT return if you have a business establishment in the UK.



1. Alternative providers of higher education

This appeal concerns the exemption from VAT for certain supplies of education. The appellants were all providers of higher education courses and contend that UK legislation does not properly implement Article 132(1)(i) of the principal VAT directive (PVD), which deals with education exemption, therefore the appellants are entitled to rely on the direct effect of the PVD and their supplies are exempt from VAT. Alternatively, they argue that some of their supplies are exempt pursuant to UK law.

The education provided by each of the appellants in the relevant period can be briefly summarised as follows:

  • SPIC operated a further and higher education college in London providing a range of higher national certificates and higher national diplomas in business management, tourism and hospitality, technology and health and social care
  • LCCA was a provider of further and higher education courses in fashion, visual arts, media, business and hospitality.
  • IMAN offered undergraduate and postgraduate degree courses, higher national certificate and diploma courses, professional programmes and certain English language courses.

Not all the topics on these complex appeals arise in relation to each appellant. The issues are as follows:

  • Were the appellants entitled to rely on the direct effect of Article 132? The appellants believe that they made similar supplies to universities, colleges of universities and further education colleges but are being treated differently for VAT purposes.
  • If the appellants were entitled to rely on the direct effect of Article 132, did their supplies qualify for exemption because the appellants have similar objects to bodies governed by public law which provide education?
  • Were SPIC and LCCA entitled to exemption in any event, pursuant to item 5B, Group 6, Schedule 9, VATA 1994 (funding for supplies of education ultimately funded by the Secretary of State)?
  • Was IMAN an “eligible body” within Note 1(b) on the basis that it was a college of a UK university?
  • IMAN was an “eligible body” within Note 1(f) on the basis that it provided some teaching of English as a foreign language. Was it entitled to exemption for all its supplies of education?

The first issue considered by the tribunal was whether Group 6, Schedule 9, VATA 1994 properly implements Article 132(1)(i). The appellants argued that Group 6 fails to give effect to the object of the exemption because the definition of an ‘eligible body’ should depend on the organisations objectives but instead it depends on whether the organisation falls within a number of prescribed categories.

The Tribunal noted that the question was whether by failing to recognise the appellants as eligible bodies, the UK had breached the principle of fiscal neutrality. In addition, it considered whether the appellants are sufficiently similar to universities, colleges of universities or further education colleges (FECs) such that their supplies of education should have the same treatment. The Tribunal  considered whether from the point of view of students, the supplies by the appellants are sufficiently similar to the supplies of eligible bodies, whether they meet the same needs of the consumer and whether the suppliers are comparable.

The FTT held that the exclusion of the appellants from the exemption does not breach the principle of fiscal neutrality and the UK was entitled to recognise universities and their colleges as having similar objects to bodies governed by public law. The regulatory regime for degree awarding powers (DAPs) and university title did not apply to the appellants and they were not in a comparable position to a university or a college of a university, therefore the supplies were not VAT exempt.

The appellants also argued that their supplies are exempt under Item 5B Group 6, as they provide education for persons under the age of 19 or who were under that age when the education or training began. The dispute is whether the course fees paid in respect of such education is ultimately “a charge to funds provided by the secretary of state”. The tribunal found that Item 5B did not apply to the supplies of education because funds provided by way of loans to students do not fall within the meaning of the phrase “a charge to funds provided by the secretary of state”.

IMAN argued it was a college of a university, however the Tribunal rejected this as it was not satisfied that there was a sufficient degree of integration. As a result, only its supplies of teaching English as a foreign language was VAT exempt.

Constable Comment: This case involved various arguments put forward by the appellants regarding the application of the VAT education exemption. Supplies of education can often be a complex area of VAT and it is recommended to seek professional advice to ensure the correct VAT treatment is applied. This is particularly important when taking account of the relatively recent decisions in cases such as Colchester Institute.

2. Exemption: Fundraising events

This case considered the VAT implications of the annual Great Yorkshire Show (the show) organised by the Yorkshire Agricultural Society (the Society). The society initially treated its admission income as standard rated; however, it subsequently submitted a VAT accounting error correction for overdeclared output tax regarding its admission income on the basis that the show is VAT exempt under the fundraising exemption available for charities and certain other qualifying bodies where specific tests are met. Corresponding input VAT adjustments were made to take account of VAT exempt supplies. HMRC rejected the VAT refund claim and subsequently raised an additional VAT assessment. The VAT sums involved were just short of £300,000.

The supply of goods and services by a charity (or another qualifying body) in connection with an event that is organised for charitable purposes, whose primary purpose is the raising of money and that is promoted as being primarily for the raising of money, is exempt from VAT where these two conditions are satisfied.

Whilst it was common ground that the show was organised for charitable purposes by a charity, HMRC took the view the show was of a commercial nature to promote farming in the community and generate profits. The Tribunal concluded that fundraising was not the exclusive purpose of the show as there were two main purposes, being fundraising and education. However, neither can be ranked in order of importance and it was concluded that the ‘primary purpose’ (raising funds) condition was met.

With regards to the ‘promoted as being primarily for the raising of money’ test, the Tribunal relied on case law to conclude this condition is an incorrect transposition of the EU VAT Directive in its entirety and therefore should be ignored. Alternatively, at least the use of the word ‘primarily’ should be ignored. As the event was promoted on fliers and admission tickets as a fundraising event, the Tribunal concluded all conditions for exemption were met and admission to the show was VAT exempt. The appeal was allowed.

Constable Comment: The Tribunal considered the fundraising exemption conditions and provided some useful commentary specifically on item 1(c), regarding the ‘promoted primarily for the raising of money’ condition. It was concluded that this went beyond the requirement of the EU VAT Directive, therefore should be deleted, or the word ‘primarily’ removed. This is a particularly interesting decision for charities and other qualifying bodies (wholly owned trading subsidiaries, trade unions, professional bodies, other public interest bodies, charitable sports clubs, and cultural bodies) and there may be scope for these organisations to revisit the VAT accounting treatment of events over the last 4 years, subject to the unjust enrichment rules and taking account of the partial exemption position. This is a decision of the FTT and does not set a wider precedent; however, it covers interesting points and references a case which did not proceed to a hearing because HMRC’s Solicitors Office concluded that “Having considered the evidential weight the Tribunal is likely to attach to the Appellant’s witness evidence in this appeal, the Respondents have concluded the evidence is, on balance, insufficient for successful litigation. The Respondents no longer intend to defend this appeal and accordingly notify their withdrawal from proceedings and respectfully request the Tribunal allows the appeal.” This also acts to remind us that not all decisions appealed do lead to a hearing.

3. Appeals: Hardship application

This case concerned ABA Motors Limited (ABA), a company selling used cars and light motor vehicles. HMRC raised VAT assessments on the basis that ABA was involved in missing trader fraud and was not entitled to a repayment of VAT which it incurred on its purchases, amounting to £110,310.

ABA appealed against the assessment and also made an application for hardship. Taxpayers are normally required to pay any VAT due on a VAT assessment before they can appeal to the Tribunal, unless HMRC are satisfied, or the Tribunal decides that the requirement to pay the VAT would cause the appellant to suffer hardship.

HMRC rejected the application and the Tribunal agreed that based on the evidence presented to HMRC, it was correct to refuse hardship. However, the Tribunal heard additional oral evidence by the taxpayer, and it accepted that ABA currently has no assets, cannot generate income, it cannot trade, it has a liability to make loan repayments and has no ability to borrow further funds. The Tribunal ruled this was not just a question of hardship, ABA simply cannot pay the VAT. The appeal was allowed, and hardship was granted.

Constable Comment: This case highlights that the Tribunal may waive the requirement to pay the VAT  to those taxpayers who can put forward genuine evidence that paying the VAT would cause hardship.


Since the end of the transitional period on 31 December 2020 European Court judgements are not binding on the UK in most cases. However, it is expected that UK courts will still take these judgements into consideration and there may be occasions where they have a more binding effect.

4. Letting of permanently installed equipment

This case concerned a dispute between the appellant, Y, and the local tax authorities regarding the VAT treatment of permanently installed equipment. Y let, in the context of a lease, a turkey-rearing shed with permanently installed equipment and machinery. It included an industrial spiral conveyor belt, a heating, ventilation and lighting system. The equipment and machinery were specially adapted for the use of the building.

Y received a single payment for the provision of the rearing shed and equipment and machinery. Y took the view the whole of its leasing service was exempt from VAT. The local tax authorities considered that the leasing of the equipment and machinery was not exempt from VAT and that the agreed one-off remuneration, 20% of which corresponded to the leasing of machinery and equipment, had to be subject to VAT.

The CJEU noted the facts that the case concerns the leasing of a rearing shed and permanently fixed equipment in that building, specifically adapted. The rental contract has been concluded between the same parties and giving rise to a single remuneration. The CJEU concluded that it is for the referring Court to ascertain whether those services constitute to a single economic supply.

It was concluded that if the referring court views the lease as a single economic supply it then follows from case law  that, where there is a single economic supply consisting of a principal supply which is exempt from VAT, being the leasing or letting of immovable property, and an ancillary supply, inseparable from the principal supply, which is excluded from that exemption, the ancillary service follows the tax treatment of the principal supply, meaning that the letting of permanently installed equipment would also be VAT exempt.

Constable Comment: In this decision the CJEU confirmed that in the case of a single economic supply, any ancillary supply that is inseparable from the principal supply would follow the tax treatment of that principal supply. However, it was for the referring court to determine whether the provision of permanently installed equipment would constitute a supply ‘ancillary’ to the supply of the lease.

5. VAT on disposal of obsolete stock

This case concerned Balgarska Telekomunikatsionna Kompania (BTK), a Bulgarian company operating in the telecommunications sector. It makes taxable supplies of telecommunication services. For the purposes of its activities, it acquires various capital goods and, with a view to their resale, mobile communication devices and various items of equipment necessary or ancillary to the use of the services it provides. VAT incurred is recovered on those acquisitions as input tax.

During a period between 2014 and 2017, BTK wrote off various obsolete goods and subsequently disposed of them by either selling it as waste, destroying or disposing of them. The Bulgarian law required BTK refund input VAT claimed on the stock unless certain conditions were met, including if the goods were destroyed.

With regards to the stock sold as waste, which was subject to VAT, the CJEU concluded it does not constitute to a change in the factors used to determine the amount to be deducted, regardless that the sale of waste is not one of BTK’s usual economic activities. As a result, there was no requirement to adjust the input VAT reclaimed on the stock sold as waste.

With regards to stock voluntarily disposed of, the CJEU concluded that there is a change in the factors used to determine the amount to be deducted and therefore an adjustment of the input tax previously reclaimed would be reasonable. However, this disposal would fall under ‘destruction’ which is one of the exceptions, irrespective of its voluntary nature. As a result, provided BTK could prove the stock was destroyed and confirm that the goods had objectively lost all usefulness in the taxable person’s economic activities, there was no requirement to adjust the input VAT recovered on the stock disposed of.

Constable Comment: This case considered the VAT treatment on the disposal of obsolete stock, specifically any adjustments necessary to the input VAT recovered on the original purchase. The case involved strict local laws which may not be applicable in the UK.

Please note that this newsletter is intended to provide a general overview of the subject. No liability is accepted for the opinions it contains or for any errors or omissions. Constable VAT cannot accept responsibility for loss incurred by any person, company or entity as a result of acting, or failing to act, on any material in this blog post. Specialist VAT advice should always be sought in relation to your particular circumstance.