Court of Justice AG's opinion issued 21 December 2016

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Summary
VAT law provides an exemption
from VAT for supplies of education
and vocational training.
It also provides an exemption for
services that are, or are regarded as
"closely related" to that principal
supply.
Brockenhurst College provides
vocational training to students in the
field of restaurant services and
performing arts and sought to apply
the exemption to supplies of
restaurant services and
performances made to third parties
arguing that those services were
closely related to the separate
supplies of training made to the
students.
Advocate General Kokott considers
that argument to be flawed.
21 December 2016
Court of Justice – Advocate General's opinion
Advocate General Kokott has issued her opinion in this UK referral to the Court of Justice
from the Court of Appeal. The issue is a very simple one. Brockenhurst College considers
that supplies of restaurant and performing art services supplied to third parties in return for
payment should benefit from the VAT exemption applied to the supply of education. This
is on the basis that the VAT Directive exempts from VAT supplies of education and the
supply of goods and services that are closely related to that supply of education.
Brockenhurst argues that the restaurant services and performances provide practical
experience to students enrolled in the catering and drama etc courses. As such, the
experience is invaluable to their studies and should be regarded as 'closely related' to the
principal supply of education. HMRC on the other hand consider that the services in
question (restaurant services and theatrical or musical performances) are supplied to third
parties in return for payment of a price. As such, these services, whilst clearly of benefit and
providing valuable practical experience to the participating students are separate supplies
made to third parties and the supplies cannot, therefore, be closely related to the supply of
education to the student.
The First-tier Tribunal (FTT) and the Upper Tribunal (UT) both agreed with Brockenhurst
College and HMRC appealed to the Court of Appeal. The Court of Appeal referred the
matter to the Court of Justice for clarification of exactly what is meant by the term "closely
related" in this context. In Advocate General Kokott's opinion, HMRC's interpretation is
correct. Closely related transactions are to be regarded as independent supplies (to the
principle supply) but do not include the supply of restaurant or training services supplied to
third parties who are not themselves receiving the principal supply of training. The third
parties pay for their own consumption (of either food or a performance) and do not pay
for the provision of education.
The full court will deliver its judgment in due course. It does, however, seem
unlikely that the court will come to any other conclusion than that expressed by
the Advocate General in her opinion. This will come as a blow to a number of FE
and similar colleges that have claims standing behind Brockenhurst College.
Brockenhurst College v HMRC
Case Alert
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556
Vinny
McCullagh
London & South East vinny.mccullagh@uk.gt.com (0)20 7383 5100