St George's University Ltd v Revenue & Customs (Value Added Tax - education and vocational training) [2021] UKFTT 13 (TC)

FTT-Tax
St George's University Ltd v Revenue & Customs (Value Added Tax - education and vocational training)
[2021] UKFTT 13 (TC) · 2019-09-20
[124]Mr Fell also referred to Case C-111/05 Aktiebolaget NN v Skatteverket [2008] STC 3203 (‘ Aktiebolaget ’) which concerned the supply and laying of an undersea cable between two Member States which was partly in international waters and outside the territory of either Member State. The first issue was whether the supply was a supply of goods or services and the second was where did it take place. The CJEU held that the provision and laying of the cable was a supply of goods. It then went onto hold that the supply of goods took place in each Member State pro rata according to the length of cable in its territory and that the part of the supply that took place in international waters was not subject to VAT.125. I do not consider that Aktiebolaget is of any assistance in determining the appropriate place of supply in this case. First, Aktiebolaget concerned a supply of goods not services and, secondly, the result turned on the specific rule in Article 8(1)(a) for the place of supply of installed goods.126. I do not accept that Trans Tirreno or Aktiebolaget support the proposition that Article 54 of the PVD should be interpreted so that the UK is entitled to tax the GSP and the UK Clinical Training Programme simply because they are carried out within the territory of the UK while the rest of the four year MD Course takes place elsewhere. I consider that the place of supply must be determined by reference to the specific rule which, in this case, is found in Article 54 of the PVD and without regard to the principle of territoriality.127. SGU contends that the place of supply is Grenada. Mr Beal submitted that if it is right to regard SGU as making a single supply of the MD Course then SGU makes that supply in Grenada and not in the UK. He contended that the relevant supply of services is a supply of the entire four year MD Course. It would be logically inconsistent and wrong to split a single supply of services into separate supplies purely for the purposes of the place of supply rules. The MD Course is a single supply of services and there can only be one place of supply.128. Mr Beal also contended that Article 54 of the PVD concerned the supply of educational events, such as fairs and exhibitions, rather than the supply of educational services from a fixed establishment. In support of that proposition, he referred to Case C-114/05 Ministre de l'Économie, des Finances et de l'Industrie v Gillan Beach Ltd [2006] ECR I-2427 (‘ Gillan Beach ’). The issue in that case was whether the service of organising two boat shows in Nice supplied by Gillan Beach Limited, a company established in the UK, was supplied in France or the UK. The question in Gillan Beach addressed by the CJEU was whether the service of organising a boat show in another country fell within Article 9(2)(c) of the Sixth VAT Directive. Article 9(2)(c) of the Sixth VAT Directive was the predecessor to article 54 of the PVD and, as material, provided:
“(c) the place of the supply of services relating to: - cultural, artistic, sporting, scientific, educational, entertainment or similar activities, including the activities of the organisers of such activities, and where appropriate, the supply of ancillary services, ... shall be the place where those services are physically carried out”. 129. In particular, Mr Beal relied on [24] and [25] of the CJEU’s judgment in Gillan Beach but it is also necessary to refer to [23]: “23. In that regard, there are grounds for stating … that the features common to the various categories of services referred to in the first indent of Article 9(2)(c) of the Sixth Directive originate in the complex nature of the services concerned, which are various services, and in the fact that those services are generally provided for a number of different recipients, that is to say, all the people taking part, in a variety of capacities, in cultural, artistic, sporting, scientific, educational or entertainment activities. 24. Those various categories of services also have the common feature that they are usually provided for specific events, and the place where those complex services are physically carried out is easy to identify, as a rule, since such events take place at specific locations. 25. A show or a fair, whatever its theme, seeks to provide to a number of different recipients, as a rule in a single place and on a single occasion, a variety of complex services, with the purpose, in particular, of presenting information, goods or events in such a way as to promote them to the visitors. In those circumstances, it must be possible to regard a show or a fair as being covered by the similar activities referred to in the first indent of Article 9(2)(c) of the Sixth Directive.” 130. Mr Fell submitted that [24] and [25] of Gillan Beach did not limit the place of supply rule in Article 9(2)(c) to events. He pointed out that, in this case, the students are all at an identifiable place and the teachers are there at the same place and time. 131.

(c) (now Article 54 PVD) is confined to “events”

. I consider that the reference to “events” is clearly related to the facts of that case and not a general statement about the scope of the rule. The use of the words “generally” in [23] and “usually” in [24] show that the CJEU did not consider that Article 9(2)(c) of the Sixth VAT Directive (now Article 54 of the PVD) was only concerned with events. It is also clear from the last sentence of [25] that the CJEU’s conclusion that the services supplied by Gillan Beach Limited fell within Article 9(2)(c) was based on the circumstances of that case, namely that the services related to shows or fairs. Further, there are, in my view, material factual differences between Gillan Beach and this case. In this case, the parties agree that SGU makes a single supply of services relating to educational activities but the educational activities take place in different countries (Grenada and the UK) at different times over a period of four years. In Gillan Beach , however, the relevant activities (the boat shows) took place in one country (France) and each one lasted for a limited period of time (three days). For those reasons, I do not find the CJEU’s reasoning and application of Article 9(2)(c) in Gillan Beach helpful in determining the place of supply in this case. 132. Mr Beal also submitted that treating part of the supply of the MD Course as taxable in the UK created the risk of double-taxation. He contended that it would be entirely possible for Grenada to apply whatever indirect taxing regime it might have to those supplies. Mr Beal submitted that the place of supply rules in the PVD are intended to avoid double taxation and relied on Case C-401/06 Commission v Germany [2008] STC 2906 , and HMRC v. IDT Card Services Ireland Ltd [2006] STC 1252 (‘ IDT’ ). I do not accept that the possibility of double taxation provides any guide to the proper place of supply in this case. It is, of course, possible that Grenada might seek to charge VAT or some other indirect tax on supplies of education by SGU but there was no evidence that it had done so and, even if it had, there is no authority for the proposition that such double taxation between EU and non-EU countries is prohibited or is even a guide to the application of the place of supply rules in the PVD. The cases of Commission v Germany and IDT relied on by Mr Beal concerned possible double taxation between Member States of the EU and say nothing about the possibility of the same supply being taxed in a third country and also in a Member State. 133. The case that seems to provide the closest parallel to this one (although the services are of a very different nature) is Case C-568/17 Staatsecretaris van Financien vLW Geelen (‘ Geelen’ ). The case concerned Mr Geelen, who was established and registered as a taxable person for VAT purposes in the Netherlands. Mr Geelen provided consumers, all of whom were also in the Netherlands, with access to live interactive erotic webcam sessions in return for consideration. The models filmed during the sessions were in the Philippines and worked for Mr Geelen who provided them with the hardware and software required to broadcast the webcam sessions. The sessions were interactive and the customers could communicate with the models and make requests. Each session was live and could be viewed by several customers simultaneously. To access the sessions, Mr Geelen’s customers had to create an account with one of the internet service providers (‘ISPs’). The ISPs received payments for the sessions from the customers and paid over a share of the payments to Mr Geelen. Mr Geelen did not account for VAT on the services and he was assessed by the Dutch tax authority. The matter reached the Supreme Court of the Netherlands which referred some questions to the CJEU for a preliminary ruling. 134. The first question consisted of two issues. The first issue was whether services supplied by Mr Geelen were “entertainment or similar activities, including the activities of the organisers of such activities, and where appropriate, supply of ancillary services” within Article 9(2)(c) of the Sixth VAT Directive and article 52(a) of the PVD. The second issue, which only arose if the services were entertainment or similar activities and which is particularly relevant to this case, was where were those services “physically carried out”. Article 52(a) of the PVD, which was the predecessor to article 54, also included educational activities, including organising such activities. 135. At the hearing, I was provided with an unofficial translation of the judgment as it was not available in English. The CJEU’s judgment has since been made available in English and I use that version below. 136. The CJEU held, at [25], that Article 9(2) of the Sixth Directive (and, therefore, Article 52(a) of the PVD) must not be regarded as an exception to a general rule which must be narrowly construed. The Court then considered, at [30] - [42], whether the services provided by Mr Geelen were “entertainment or similar activities”. 137. Only at [43] did the CJEU start to consider where the services were physically carried out. The CJEU repeated its observation, made in [32] - [34], that the supply of the services of organising and offering live interactive erotic webcam sessions was a complex supply which was rendered not by the models in the Philippines but by Mr Geelen, who organised the sessions. In [47], the CJEU adopted the Advocate General’s observations in point 50 of his Opinion that: “… since the activities necessary for the supply of those complex services are concentrated in the place from which the provider, on the one hand, organises the interactive sessions relating to the erotic show performed by the models and, on the other hand, provides customers with the opportunity to view those sessions on the internet, from the place of their choice, and to interact with those models, such a complex supply of services must be regarded as being ‘physically carried out’ … in the place where that service is supplied by that provider, namely, in the case in the main proceedings, the place where his business is established: the Netherlands.” 138. It is clear from the facts of the case and the use of the term “those complex services” that the CJEU recognised that both Mr Geelen and the models were providing services. The use by the CJEU of the term “complex supply of services” in relation to Mr Geelen’s supplies to his customers might suggest that the CJEU regarded the services as a single supply, ie a composite service. I do not accept that the CJEU’s reasoning in Geelen is confined to single supplies because, if so, then I would have expected the Court to discuss that in further detail which it does not do. In any event, the point is not relevant in this case as the parties agree that the four year MD Course is a single supply of services. 139. At [48] and [49], the CJEU stated that it did not matter that the place of supply under Article 9(2)(c) of the Sixth Directive, as interpreted by the Court in that case, was the same as the place of supply under Article 9(1), now Article 45 of the PVD, ie the Member State in which the supplier of the services is established. I consider that the CJEU meant no more by this than that two different place of supply rules may produce the same place of supply in an appropriate case. At [50], the CJEU emphasised the importance of achieving a rational result for tax purposes in the circumstances of the case. 140. At [53], the CJEU held that: “… a complex supply of services … consisting in the offer of live interactive erotic webcam sessions constitutes an ‘entertainment activity’ … which must be regarded as being ‘physically carried out’ … at the place where the supplier has established his business or a fixed establishment from which those services are supplied or, in the absence of such a place, the place where he has his permanent address or usually resides.” 141. Having found that it is SGU, and not UNN and the UK Training Hospitals, that makes supplies to the students for VAT purposes, the question is where do the activities of SGU which make up those supplies actually take place. It is therefore necessary to identify the activities. 142. SGU provides the MD Course to students under a contract between SGU and the students. The MD Course is a single supply by SGU of services relating to education and vocational training delivered in Grenada and elsewhere. Students may undertake all or most or only one year of the four years of the MD Course in Grenada. Regardless of where the students decide to study, the course is organised and administered by SGU in Grenada. In order to provide teaching and administrative support in relation to the MD Course, SGU has staff and physical infrastructure in Grenada. In addition, SGU requires some staff and physical infrastructure in the UK so that the students can take parts of the MD Course, namely the GSP and the UK Clinical Training, in the UK. The parties agreed that SGU does not have a fixed establishment in the UK. The staff and technical resources used to provide the GSP and UK Clinical Training on the ground in the UK are not owned by SGU but are provided to it by, variously, SGISML, UNN and the UK Training Hospitals. That conclusion is not, in my view, undermined by the fact that some of the teaching staff at the UK Teaching Hospitals are members of the SGU Faculty. 143. Applying the CJEU’s analysis in Geelen , it seems to me that the supply of the MD Course which, for some SGU students, includes the GSP and UK Clinical Training Programme, is a complex supply by SGU. Mr Beal was not inclined to accept that SGU was making a complex supply, however, I consider that it is properly described as such. SGU devises, organises and supervises the GSP and UK Clinical Training provided by UNN and the UK Teaching Hospitals. SGU offers the students the opportunity to take part of the four year MD Course in the UK if they so choose. Where students choose to take part of the MD Course in the UK, SGU’s services are not the performance of the underlying educational activity but the provision to students of the opportunity to take part of the MD Course in the UK and the organisation of the provision of education and training in the UK. I consider that, as in the case of Mr Geelen’s supplies, the place where SGU’s activities actually take place is where it makes all the necessary arrangements for the provision of the GSP and UK Clinical Training to the students, ie Grenada. It follows that SGU’s supplies are outside the scope of UK VAT. 144. My conclusion on this issue means that the fees paid by students for the four year MD Course, which is a single supply of services, do not need to be apportioned to reflect those parts of the course taken by students in the UK and subjected to UK VAT. Accordingly, SGU’s appeal must be allowed and it is not necessary for me to consider the remaining two issues, however, I do so because I heard submissions on them and in case I am wrong on the question of the place of supply. Issue 3: VAT liability of supply 145. The third issue, which only arises if SGU makes supplies to the SGU students in the UK, is whether the supplies are exempt from VAT as the provision of education and vocational training by an eligible body. 146. Title IX of the PVD covers exemptions from VAT. Article 131 states the exemptions provided for in Chapters 2 to 9 shall apply “without prejudice to other Community provisions and in accordance with conditions which the Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse.” 147. Chapter 2 sets out exemptions for certain activities in the public interest. Article 132(1) states that: “1. Member States shall exempt the following transactions: … (i) the provision of children’s or young people’s education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, by bodies governed by public law having such as their aim or by other organisations recognised by the Member State concerned as having similar objects;” 148. Article 133 provides that Member States may make the grant of the exemption conferred by Article 132(1)(i) subject to conditions, such as a requirement that the body in question does not systematically aim to make a profit or is managed and administered on an essentially voluntary basis and other matters. 149. The provisions of the PVD relating to the exemption of the supply of university education and vocational training are implemented in the UK by section 31(1) of the VATA 1994 which provides that: “(1) A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 9 and an acquisition of goods from another member State is an exempt acquisition if the goods are acquired in pursuance of an exempt supply.” 150. Group 6 of Schedule 9 to the VATA 1994 covers supplies of education. Its relevant Items read as follows: “1. The provision by an eligible body of— (a) education; (b) … (c) vocational training. … 4. The supply of any goods or services (other than examination services) which are closely related to a supply of a description falling within item 1 (the principal supply) by or to the eligible body making the principal supply provided— (a) the goods or services are for the direct use of the pupil, student or trainee (as the case may be) receiving the principal supply; and (b) where the supply is to the eligible body making the principal supply, it is made by another eligible body.” 151. The Notes to Group 6 of Schedule 9 state in Note 1 that: “(1) For the purposes of this Group an ‘eligible body’ is— … (b) a United Kingdom university, and any college, institution, school or hall of such a university; … (e) a body which– (i) is precluded from distributing and does not distribute any profit it makes; and (ii) applies any profits made from supplies of a description within this Group to the continuance or improvement of such supplies; …” 152. In this decision, I refer to a body within Note 1(e) as a ‘not-for-profit body’. 153. Mr Beal submitted that if, contrary to his submissions on the first two issues, SGU makes supplies of education and vocational training in the UK then those supplies fall within the exemption for the provision of education and vocational training by an eligible body. Mr Beal put forward three arguments in support of that submission. The first was that Article 132(1)(i) of the PVD has direct effect and that SGU can rely on it because SGU meets the criteria for treatment as a UK university or other organisation which has been recognised as having similar objects by the UK providing education and/or vocational training. The second argument is that SGU is, or should be treated as, a college or institution of a UK university, ie UNN, and thus an eligible body for the purposes of Item 1 of Group 6 by virtue of Note (1)(b) to the Group. Mr Beal’s final argument is that restricting the exemption to a UK university, as Note (1)(b) does, would breach a number of principles of EU law and HMRC cannot rely on it. 154. Mr Fell contended that the supplies could not be exempt because SGU is not a UK university or a college of one. He submitted that the UK has lawfully exercised its discretion and powers to prescribe the bodies which can make exempt supplies of education and, having done so, supplies by an institution which is neither a UK university (or a college of one) nor a not-for-profit body are not exempt. 155. Mr Beal’s submission on the first argument was simple and straightforward: SGU is a UK university within Note (1)(b) to Group 6 of Schedule 9 to the VATA 1994 because it is a university and is making supplies of higher education and vocational training in the UK. The definition of university given in the PVD does not depend on the specific definitions given in domestic law - see University of Cambridge v HMRC [2009] EWHC 434 (Ch) (‘ Cambridge University ’) at [48]. SGU has the same objects as a UK university, namely providing educational services, and should be treated as such and the UK is bound to recognise it as such - see HMRC v Open University [2016] EWCA Civ 114 (‘ Open University ’) at [120] - [123]. 156. I do not accept Mr Beal’s submissions on the first argument. Article 132(1)(i) of the PVD exempts the supply of university education by bodies governed by public law having such as their aim and by other organisations recognised by the Member State concerned as having similar objects. Article 132(1) does not define ‘university’ or ‘body governed by public law’. Importantly in this case, Article 132(1) does not prohibit Member States from providing that supplies of university education by their national universities, if they are not bodies governed by public law, are exempt as supplies by ‘other organisations’. That is, of course, subject to the national universities meeting the condition in Article 132(1)(i) that they are recognised by the Member State concerned as having similar objects to public bodies providing university education. Note (1)(b) to Group 6 recognises that UK universities are such organisations as Arden LJ pointed out in Finance and Business Training Ltd v HMRC [2016] EWCA Civ 7 (‘ FBT ’) where she said at [69] that:[69]“ Note 1(b) achieves the result that all UK universities, even though not ‘bodies governed by public law,’ are bodies which are recognised by the UK for the purposes of Article 132(1)(i) .” 157. The effect of Note 1(b) to Group 6 was also noted by Lord Kitchin in SAE Education Ltd v HMRC [2019] UKSC 14 (‘ SAE ’) where he said at [46]:
“… Parliament has chosen to exercise the discretion conferred upon it [in Article 132(1)(i)] by exempting from VAT, so far as relevant, the provision of education by a United Kingdom university and any college of such a university. The term ‘university’ is not defined in the VAT Act. However, the conditions under which a body in the United Kingdom is entitled to use the word university in its title are regulated by statute. Over 100 bodies are presently entitled to call themselves a university and they vary greatly in character.”
SGU is not one of those bodies regulated by statute and entitled to call themselves a university in the UK. I conclude that SGU is not a UK university for the purposes of Note (1)(b) to Group 6. That conclusion does not determine this issue as Mr Beal also contended that SGU is entitled to rely on the direct effect of Article 132(1)(i) of the PVD. 158. In [48] of Cambridge University , the Chancellor held that the decisions of the CJEU discussed in that case established that ‘body governed by public law’ in the predecessor to Article 132(1)(i) is a concept of EU law and means such bodies must be identified as part of the public administration of the relevant Member State and whether a body can be so identified is a matter for the national court. In that case, it was held that Cambridge University was not a body governed by public law. In this case, it is not contended that SGU is a body governed by public law in the sense explained in Cambridge University nor, in my opinion, could it be. That means that, when relying on the direct effect of Article 132(1)(i), SGU must establish that it is an organisation recognised (or which ought to be recognised) by the UK as having similar objects to bodies governed by public law in the UK which provide university education or vocational training. 159. In Case C-319/12 Minister Finansów v MDDP sp z oo Akademia Biznesu, sp komandytowa [2014] STC 699 (‘ MDDP ’), the CJEU held, at [37], that Article 132(1)(i) does not specify the conditions or procedures for defining the similar objects and Member States have a discretion in relation to the national law rules which determine whether recognition may be granted to such organisations. Such rules are subject to the requirements of European Union law, in particular the principle of equal treatment, which, in the field of VAT, takes the form of the principle of fiscal neutrality (see MDDP [38]). It is clear from MDDP (see [39]) that: (1) there is no general exemption for supplies of educational services without consideration of the objects pursued by non-public organisations providing those services; and (2) Member States have a discretion, subject to the principles of EU law, in setting their rules for recognising whether an organisation has similar objects to a body governed by public law which provides the same services. 160. The case of FBT concerned a company, which provided courses leading to the grant of degrees by the University of Wales. The courses were university education but the question was whether the supplies of such education were exempt. The taxpayer company was a profit-making enterprise and so did not qualify as an eligible body under Note 1(e) to Group 6 of Schedule 9 to the VATA 1994. It contended that it was a college, institution, school or hall of a UK university and thus an eligible body by virtue of Note 1(b) to Group 6. The FTT applied the factors described in HMRC v School of Finance and Management (London) Ltd [2001] EWHC 1175 (Ch) (‘ SFM ’) and decided that the taxpayer company was not a college etc of the university. The taxpayer appealed unsuccessfully to the Upper Tribunal. On further appeal to the Court of Appeal, the taxpayer argued, among other things, that Parliament had failed to set conditions for the education exemption in accordance with EU law and, in particular, the principles of legal certainty and fiscal neutrality. Arden LJ (with whom Gloster and Sharp LJJ agreed), rejected that submission. She held as follows at [53] and [54]:
“53. … It is now clear from MDDP that a Member State can and should set the conditions for bodies which are not governed by public law which are to be entitled to the education exemption (‘non-public bodies’). How it sets those conditions is a matter for national law. 54. No one has suggested that Parliament had to use any particular form of words to set these conditions. In my judgment, it was therefore open to Parliament to exercise the UK’s option by deciding which non-public bodies were to qualify and then including a list of them in the relevant legislation. That is what Parliament has done in Note 1(b).” 161. Arden LJ concluded on this point at [57]: “57. FBT contends that Parliament has not met the requirements of the EU law principle of legal certainty by setting out criteria which are to apply to determine when non-public bodies seek to enjoy the education exemption. The criteria have to be ‘neutral, abstract and defined in advance’. In my judgment, this is achieved by the combination of note (1)(b) and the SFM factors. These factors are neutral, they are abstract and defined in advance. By applying them, it is possible to know what supplies and which suppliers qualify for exemption.” 162. SGU is not a body governed by public law and is not classified as a UK university by the UK. As I have already stated, nothing in Article 132(1)(i) defines a ‘university’ or requires a Member State to recognise an entity as one for the purposes of the exemption. The issue then is whether, on the assumption that it makes supplies of university education or vocational training in the UK, SGU is an organisation recognised by the UK as having similar objects to bodies governed by public law which have the aim of providing university education or vocational training. There is no dispute that SGU is not so recognised in the UK: the question is whether it should be. 163. At [123] of Open University , the Chancellor held: “In the present case, for the reasons I have given, during the relevant period the BBC had the same objects as public bodies specified in the first part of Article 13A(1)(i) and, if it had been a public body, the BBC would have satisfied all the requirements for exemption for educational and training supplies. Either the UK had defined the BBC as having ‘similar objects’ within Article 13A(1)(i) or, if the United Kingdom had not, the BBC and the OU are entitled to rely directly on that Article because the failure of the UK was a failure to implement the Sixth VAT Directive. The object of the education and training exemption was intended to increase access to the services specified in Article 13A(1)(i) by avoiding the increased costs that would result if they were subject to VAT: the MDDP case at paragraph 26. To exclude the BBC from the exemption would both be contrary to the objective of the Sixth VAT Directive and contrary to the principle of fiscal neutrality.” 164. The Open University is not authority for the proposition that the UK must recognise non-UK universities as UK universities for the purposes of Group 6 of Schedule 9 to the VATA 1994. That would be contrary to the views expressed in FBT and SAE quoted in [156] and [157] above. The Chancellor’s comments in [123] of Open University were obiter and based on the facts of that case. Importantly, there was no discussion in that case (because the issue did not arise) of the conditions in Note 1(e) to Group 6 of Schedule 9 to the VATA 1994. If SGU is not a UK university but has similar objects to bodies governed by public law which have the aim of providing university education or vocational training, SGU will be an eligible body for the purposes of Group 6 if it is precluded from distributing (and does not distribute) any profit it makes and it applies any profits made from supplies of education and vocational training to the continuance or improvement of such supplies. However, SGU did not contend and there was no evidence to suggest that it met those conditions. 165. Mr Beal’s second argument is that SGU is, or should be treated as, a college or institution of a UK university, ie UNN. As a college or institution of UNN, SGU would be an eligible body for the purposes of Item 1 of Group 6 of Schedule 9 by virtue of Note (1)(b) to the Group. The fact that SGU is a profit-making enterprise does not disqualify SGU because the not-for-profit condition in Note 1(e) does not apply to universities or their colleges and institutions. Mr Beal relied on the reasoning of Lord Kitchin in SAE at [53] and [54]. He did not contend that SGU is a college etc but that it is functionally equivalent to a college of the UNN. 166. In SAE , Lord Kitchin set out, in [53], five questions which should be asked when considering whether an entity is a college, institution, school or hall of a UK university and the significance of the responses to those questions in [54]: “53. … As I have said, the presence of a foundation or constitutional document or some other legal relationship establishing the college as a constituent part of the university in a constitutional or structural sense will be sufficient to prove that it is a college of the university within the meaning of Note 1(b), save in an exceptional case. But that is not a necessary condition. In assessing whether a body is a college of a university the following five questions are also likely to be highly relevant: (i) whether they have a common understanding that the body is a college of the university; (ii) whether the body can enrol or matriculate students as students of the university; (iii) whether those students are generally treated as students of the university during the course of their period of study; (iv) whether the body provides courses of study which are approved by the university; and (v) whether the body can in due course present its students for examination for a degree from the university. 54. If a body can establish the presence of each of these five features, focused as they are on the objects of the body, the relationship between the students of the body and the university and the degree to which the activities of the body are recognised by and integrated with the university, then in my judgment it is highly likely to be a college of the university within the meaning of Note 1(b). Again, I do not suggest that there may not be other cases where the degree of integration of the activities of the body and the university is such that it may properly be described as a college of the university in light of some or most of the factors I have identified and other aspects of the services it supplies. All will depend on the particular circumstances of the case.” 167. In closing, Mr Beal formally accepted that the witnesses for SGU and UNN had repeatedly stated that they did not regard SGU as a college of the UNN. Mr Beal accepted that SGU and the UNN are both universities, one of which is established in the UK and one of which is not. He submitted that focusing solely on the word ‘college’ in a formalistic sense and trying to determine whether SGU is a college of the UNN is not the right approach. He contended that the correct approach is to consider the functional test set out by Lord Kitchin in the last sentence of [56]: “The question is whether the college and the university are so integrated that the entity is imbued with the objects of the university, and that is best answered in the manner I have described.” 168. I do not accept Mr Beal’s submission on this point. It is obvious on its own terms that the final sentence of [56] in SAE is a summary and refers to the questions and approach described by Lord Kitchin in [53] and [54]. I consider that, in order to reach the position that SGU is an eligible body within Note 1(e) to Group 6 of Schedule 9 to the VATA 1994, it must be shown that SGU is a college or institution (it was never suggested that ‘school’ or ‘hall’ were relevant) of the UNN. That should be approached by asking the questions set out by Lord Kitchin in [53] and taking into account the matters discussed in [54]. To ignore those questions and simply ask whether an entity is so integrated with a university that the entity is imbued with the objects of the university is to apply a different and, in my view, incorrect test. 169. Mr Beal contended that, even if it must be accepted that SGU and the UNN did not regard SGU as formally being a college of the UNN it was necessary to look at the bigger picture and it was sufficient to answer the other four of Lord Kitchin’s questions in the affirmative. I now consider the remaining four questions in the context of the facts of this case. 170. The second of Lord Kitchin’s questions is whether SGU can enrol or matriculate students as students of the UNN. The evidence of Mr Zwarych and Ms Crabtree, described in [28] and [29] above, shows that while SGU (and SGU alone) decided whether to admit an applicant as a student on the MD Course and the GSP, the UNN retained the power to enrol those students as students of the UNN. I was told that only very rarely, if at all, did the UNN refuse to accept a student that had been admitted by SGU onto the MD Course. However, that does not address Lord Kitchin’s question which is not what happened in practice but what is the degree to which the activities of SGU in relation to enrolment of persons as students of the UNN are recognised by and integrated with the UNN. On the basis of the evidence, I find that while admission onto the MD Course was a necessary preliminary step in participating in the GSP, SGU had no power to enrol students accepted for the MD Course as students of the UNN. 171. I need only deal briefly with the third question, which is whether the SGU students on the GSP are generally treated as students of the UNN during their period of study, ie the GSP, at the UNN. I accept that the evidence, set out at [37] above and elsewhere, is that the SGU students on the GSP are treated in exactly the same way as all other UNN students and are for all intents and purposes seen as UNN students throughout their time on the GSP. I do not regard the fact that the SGU students on the GSP are taught separately from the general body of UNN students as significant. Students on different courses are no doubt taught separately but are still all students of the UNN. 172. The fourth question is whether SGU provides courses of study which are approved by the UNN. In this case, there was no evidence that the UNN approved the MD Course or the GSP provided by SGU and I find that the reality is quite the reverse. The contractual obligations imposed by Schedules 1 and 2 to the 2015 Agreement described in [95] and [96] above and the evidence of Mr Zwarych and Ms Crabtree recorded in [25] and [26] above show that SGU controlled the content of the GSP and the teaching provided by the UNN. I accept that, as Ms Crabtree stated in evidence, the UNN needed to be satisfied that the GSP meets the same quality standards as the other courses offered at the UNN. However, that is not approval of the GSP provided by SGU but a condition of the award of the DipHE. Accordingly, I conclude that the answer to the fourth question must be ‘no’. 173. Lord Kitchin’s final question is whether SGU can, in due course, present its students for examination for a degree from the UNN. In my view, the answer to this question is also ‘no’. There was no evidence that SGU presented the students on the GSP for examination leading to the presentation of a degree by the UNN. As described at [39] above, in the UK, undergraduate honours degrees awarded by universities are Level 6 qualifications. The DipHE awarded by the UNN on successful completion of the GSP is equivalent to a Level 5 qualification in the UK. A Level 5 qualification is not a degree but, as Mr Robertson stated, an award in its own right. 174. If, by ‘degree’, Lord Kitchin also meant any lesser academic award made by a university then I still regard the answer as ‘no’. Lord Kitchin’s question envisages that SGU provides a course of study (see question four) after which it presents the students to the UNN to be examined for an academic award which is the object of the course of study. In this case, the evidence does not show that the DipHE is the object of the SGU students on the GSP. The GSP is the first year of and a necessary step in completing the four year MD Course which is the course of study provided by SGU and the objective of the students who enrol on it. The DipHE is simply the recognition of completion of the first year of the MD Course by students on the GSP. 175. Having considered Lord Kitchin’s questions, the contractual relationships and the interaction between SGU, the UNN and the students revealed by the evidence, I find that SGU is not a college of the UNN. 176. Mr Beal’s third argument on this issue is that exempting educational services supplied by a UK university while not exempting the same services when supplied by a university, such as SGU, established outside the UK infringes a number of general principles of EU law, including the principles of non-discrimination and fiscal neutrality. As they do not involve any further findings of fact but are purely matters of law (and my decision on this point is not necessary for the determination of the appeal), I can deal with Mr Beal’s submissions on EU law quite briefly. 177. I have already described, when discussing Mr Beal’s first argument on this issue, how Article 132(1)(i) of the PVD confers a discretion on Member States to recognise organisations which are not bodies governed by public law but have similar objects to such bodies which have the provision of education as their aim. MDDP makes clear that Member States can and should set the rules for determining which bodies that are not governed by public law are recognised as organisations whose supplies of educational services are exempt. That is what the UK has done in Notes 1(b) and 1(e) to Group 6 of Schedule 9 to the VATA 1994 (see FBT and SAE ) which, in my view, must be considered together. 178. In those provisions, the UK recognises UK universities as other organisations which have similar objects to bodies governed by public law that provide educational services. If the UK had stopped there, then Mr Beal’s submissions would have had considerable force. However, the UK has not only provided that only UK universities can benefit from the exemption but also exempts supplies of education and vocational training by not-for-profit bodies. The imposition of a not-for-profit condition is specifically permitted by Article 133 of the PVD. It seems to me that the principles of EU law relied on by Mr Beal do not require the UK to recognise all universities, wherever they are established, for the purposes of the exemption or to disapply a permitted not-for-profit condition in relation to non-UK universities but not other bodies that are not universities. In short, there is no infringement of EU law where a Member State correctly implements a provision of the PVD and applies a permitted restriction to the implementation of that provision. 179. For the reasons given above, I consider that the UK is entitled to, and has, restricted the exemption for the provision of university education and vocational training to supplies of such services by UK universities (including colleges, institutions etc of such universities, if separate entities) and not-for-profit bodies, ie other organisations recognised by the UK and subject to the condition permitted by Article 133 of the PVD. SGU is not a UK university or a college or institution of one and nor is it not a not-for-profit body. It follows that any supplies of university education or vocational training made by SGU in the UK do not fall within Item 1 of Group 6 of Schedule 9 to the VATA 1994 and there are no grounds on which SGU can invoke the direct effect of Article 132(1)(i) of the PVD. Accordingly, supplies of university education or vocational training made by SGU in the UK are not exempt. Issue 4: taxable amount 180. The fourth issue is what is the taxable amount in relation to the supplies made by SGU in the UK for VAT purposes. Obviously, the issue does not arise if (as I have held) SGU’s supplies to its students on the GSP and undertaking the UK Clinical Training Programme take place in Grenada for VAT purposes and are thus outside the scope of UK VAT. In case I am wrong and SGU’s supplies of the GSP and the UK Clinical Training Programme take place in the UK, I consider the evidence and submissions in relation to the taxable amount of the supplies. 181. Chapter 2 of Title VII of the PVD contains the rules for determining the taxable amount of supplies of goods and services. In this case, the general rule in Article 73 applies: “In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.” 182. Article 79 provides that the taxable amount does not include, among other things, “amounts received by a taxable person from the customer, as repayment of expenditure incurred in the name and on behalf of the customer”
. To exclude such amounts from the taxable value, the supplier must enter them in their books in a suspense account and provide proof of the actual amount of the expenditure. Neither party in this case suggested that SGU incurred expenditure with the UNN or UK Teaching Hospitals on behalf and in the name of the SGU students participating in the GSP or UK Clinical Training Programme and there was no evidence that any amounts were entered in a suspense account by SGU. 183. The provisions of the PVD relating to place of supply are implemented in the UK by the value of supply sections in the VATA 1994 and the VAT Regulations 1995. Section 19(2) of the VATA 1994 provides that, where the supply is for a consideration in money, its value is such amount as, with the addition of the VAT chargeable, is equal to the consideration. Section 19(4) of the VATA 1994 provides:
“Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it.” 184. SGU’s position is that the taxable amount should be determined by reference to that portion of the consideration which is attributable to the supplies in the UK which is not the same as the fees paid for the academic terms during which the SGU students study in the UK. Mr Beal submitted that the termly payments made by SGU students while they were participating in the GSP and the UK Clinical Training were consideration for services in addition to those provided in the UK. The fees paid (or included payment) for supplies of the whole of the four year MD Course and were consideration for more than just the services provided in the UK. Mr Beal asked me to give a decision on whether a cost-based apportionment method should be agreed by the parties rather than determine the value of the supplies or the detail of how it should be calculated. 185. HMRC contend that the taxable amount of SGU’s supplies in the UK is consideration, ie the fees, paid by the SGU students to SGU for the academic years in which the GSP and the UK Clinical Training are supplied. Mr Fell contended that VAT is chargeable on the full amount of the fees paid by the students to SGU for the academic terms in which the GSP and the UK Clinical Training Programme are supplied. 186. Essentially, the only matter for my determination is whether the fees paid by the SGU students to SGU for the terms in which the GSP and UK Clinical Training take place relate solely to the education and vocational training in the UK or are also consideration for other services which take place elsewhere, eg in Grenada. 187. In his first witness statement, Mr Zwarych’s evidence was that the cost to SGU in providing each individual term varies as the resources required differ depending on whether the student spends the term on site at SGU, at the GSP or at a teaching hospital. However, as part of SGU’s invoicing arrangements, the amount charged to students each term is not intended to represent the actual cost of that term but rather represents a spreading of the cost over the ten terms to make the total cost of the MD Course easier for students to manage. 188. Mr Zwarych said the fees charged by SGU for each term of the four year MD Course, effective from 1 May 2018, were: (1) US$30,062 for each of terms one and two; (2) US$41,122 for both of terms three and four which are typically invoiced together; (3) US$33,202 for term five; and (4) US$30,345 for each of terms six to ten. The tuition fees for each term included an administrative fee which Mr Zwarych said was 17%. 189. In addition, SGU charged each student on the UK Clinical Training Programme US$550 per week for the year 2018. SGU pays the fees received for the UK Clinical Training Programme to the UK Teaching Hospitals on behalf of the students. 190. When he was giving oral evidence, Mr Zwarych was asked why, if the intention was to spread the cost of the MD Course over the ten terms, SGU did not just divide the total into ten equal instalments. Mr Zwarych said that the fees for the MD Course were divided into two halves: the first half is the academic course and the second (terms six to ten) is the clinical training. A decision had been taken, before Mr Zwarych’s time, to try and allocate the cost between those two halves disproportionately and more cost had been allocated to the last two years than to the first two. Mr Zwarych acknowledged that there was not a lot of science to the allocation which was really just an historical convention. 191. Students on the MD Course are invoiced separately for each term. The invoices are issued by University Support Services LLC on behalf of SGU. I was shown some invoices for fees payable by students issued while they were studying in the UK. One such invoice was the second term of the year at the UNN on the GSP. It identified the fee charged as for “Tuition Global Scholars Term 2”
. It also included some other charges, eg for administration and accommodation (which is agreed to be a recharge in respect of a supply by the UNN). 192. In my view, the taxable amount for the supply of the MD Course, which is a single supply of services relating to educational and vocational activities, is the aggregate of the fees received by SGU for the course. If, contrary to my decision on Issue 2, part of that supply takes place in the UK and is taxable then what is the value of supplies of the GSP and the UK Clinical Training Programme made by SGU in the UK? The answer to that question is the part of the consideration that is properly attributable to it (see section 19(4) of the VATA 1994) but how is that to be determined? In this case, the answer seems to me to be straightforward. 193. Under the contract between them, SGU and the students agree that the consideration for the four year MD Course should be apportioned and invoiced termly with one invoice and payment for each term. Both in contract and in practice (or economic reality), the consideration for each term is the amount invoiced for that term. Where the place of supply of the education and training services supplied during that term is the UK then the amount invoiced for that term is, in my view, properly regarded as the consideration for that part of the MD Course, ie the services supplied during the period covered by the invoice. 194. That conclusion is not undermined by the fact that some part of the fee shown on the invoice for a term relates to administration which is carried out in Grenada. Such administration will inevitably relate to parts of the MD Course supplied in the UK as well as parts supplied elsewhere. Making that proportion of the administration charge which is calculated and charged by reference to the fees for services supplied in the UK is an appropriate allocation of charges for overheads to the supply. There was, in any event, no evidence to show how the fees and administration charge were allocated. Mr Zwarych’s evidence was that it owed more to historical practice than mathematical calculation. In the circumstances, I can see no reason to set aside contractual provisions and practice in favour of unexplained “historical convention”. Disposition 195. For the reasons set out above, I have concluded that: (1) SGU makes supplies of educational services (including the GSP and the UK Clinical Training Programme) to the SGU students for VAT purposes; (2) the place of supply for VAT purposes of those supplies is Grenada; (3) accordingly, the supplies are outside the scope of UK VAT; and (4) SGU’s appeal is allowed 196. I would like to thank both counsel for their extremely clear and helpful presentations, both written and oral, of the issues in this case. Costs 197. This case was allocated to the Complex case category under rule 23 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (‘FTT Rules’) and SGU has never requested that the proceedings be excluded from potential liability for costs under rule 10(1)(c) of the FTT Rules. Accordingly, the Tribunal has power to award costs on an application or of its own motion. Any application for costs in relation to this appeal must be made in writing within 28 days after the date of release of this decision. As any order in respect of costs will, if not agreed, be for a detailed assessment, the party making an application for such an order need not provide a detailed schedule of costs claimed with the application as required by rule 10(3)(b) of the FTT Rules. Right to apply for permission to appeal 198. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. JUDGE GREG SINFIELD CHAmber president RELEASE DATE: 22 JANUARY 2021 Postscript I apologise to the parties for the delay in producing this decision. It was partially complete at the time that the country entered lockdown due to the Covid-19 in March 2020, but I regret to say that work on it then ceased as other matters occupied my attention. Subsequently, I found it difficult to find time to focus on writing the decision and, due to the passage of time, completion of the remainder took far longer than it should have done.

Cited in 1 later judgment