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Hornet nest

VAT: College case that stirred the hornet’s nest


A win in an upper tribunal test case for further education colleges has triggered a puzzling reaction from HMRC in Revenue and Customs Brief 8(2021). James Johnson outlines what may happen next.  

25th Jun 2021
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The case of Colchester Institute Corporation v HMRC [2020] UKUT 368, has certainly caused a stir. The case revolved around the VAT treatment of grant funding that Colchester College received from statutory funding agencies. Such funding had always been treated as outside the scope of VAT. However, the Lennartz principle allowed VAT to be claimed at the outset provided it was also declared as output tax later.

Colchester bucked the system by convincing the upper tribunal that the grants it received from the Education Funding Agency and Skills Funding Agency were third-party consideration for supplies of exempt education. However, the UT spoiled the party somewhat by finding that related input tax would need to be adjusted rather than being deemed out of time so effectively Colchester could not have its cake and eat it.

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By Rgab1947
28th Jun 2021 14:57

I got lost by the 2nd paragraph so conclude that VAT is best left alone for me.

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