“1. In each Claim Period SRC shall, and upon receipt of any necessary documentation, calculate the amount due to the Provider in respect of the Services provided. SRC shall advise the Provider of the amount due to it, which will equate to 80% of the DFE Funding Allocation. The Provider shall then issue an invoice to SRC for such amount as notified to it and SRC will make such payments in accordance with clause 5.2. 2. The Provider hereby acknowledges and agrees that SRC may make payments to the Provider for the provision of Services prior to receiving the DFE Funding Allocation… … 4. If part of the training is carried out (E.g. Essential Skills) by Southern Regional College, the college will deduct a full cost recovery rate for training delivered and resources deployed.”
“Article 2 1. The following transactions shall be subject to VAT: (a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such; … (c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;”
“TAXABLE PERSONS Article 9 1. 'Taxable person' shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity. Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as 'economic activity'. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.”
“Article 132 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; … Article 133 Member States may make the granting to bodies other than those governed by public law of each exemption provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1) subject in each individual case to one or more of the following conditions: (a) the bodies in question must not systematically aim to make a profit, and any surpluses nevertheless arising must not be distributed, but must be assigned to the continuance or improvement of the services supplied … Article 134 The supply of goods or services shall not be granted exemption, as provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1), in the following cases: (a) where the supply is not essential to the transactions exempted; (b) where the basic purpose of the supply is to obtain additional income for the body in question through transactions which are in direct competition with those of commercial enterprises subject to VAT…”
“2. Value added tax (1) Value added tax shall be charged, in accordance with the provisions of this Act – (a) on the supply of goods or services in the United Kingdom (including anything treated as such a supply)…”
“4. Scope of VAT on taxable supplies (1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. (2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply. … 5. Meaning of supply: alteration by Treasury order. (1) Schedule 4 shall apply for determining what is, or is to be treated as, a supply of goods or a supply of services. (2) Subject to any provision made by that Schedule and to Treasury orders under subsections (3) to (6) below— (a) “supply” in this Act includes all forms of supply, but not anything done otherwise than for a consideration; (b) anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of services. …”
“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.”
“Group 6 - Education Item No 1. The provision by an eligible body of – (a) education; …or (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. … NOTES (1) For the purposes of this Group an “eligible body” is- … (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. … (3) “Vocational training” means – Training, re-training or the provision of work experience for – (a) any trade, profession or employment; or (b) any voluntary work connected with – (i) education, health, safety, or welfare; or (ii) the carrying out of activities of a charitable nature.”
“13(1) Subject to subparagraph (4) below, where a registered person satisfies the Commissioners that he is not liable to be registered under this Schedule, they shall, if he so requests, cancel his registration with effect from the day on which the request is made or from such later date as may be agreed between them and him. (2) Subject to subparagraph (5) below, where the Commissioners are satisfied that a registered person has ceased to be registrable, they may cancel his registration with effect from the day on which he so ceased or from such later date as may be agreed between them and him. (3) Where the Commissioners are satisfied that on the day on which a registered person was registered he was not registrable, they may cancel his registration with effect from that day. (4) The Commissioners shall not under subparagraph (1) above cancel a person's registration with effect from any time unless they are satisfied that it is not a time when that person would be subject to a requirement to be registered under this Act. (5) The Commissioners shall not under subparagraph (2) above cancel a person's registration with effect from any time unless they are satisfied that it is not a time when that person would be subject to a requirement, or entitled, to be registered under this Act. …”
“The Appellants assert that they are entitled to de-register for VAT based on supplies of food from their café being exempt, as they are “closely related” to supplies of education. The Respondents do not accept this. The education is fully grant-funded and therefore outside the scope of VAT. The supplies of food made by the café are therefore not “closely related” to a supply of education as there is no such supply. Consequently the supplies made by the café are not exempt, and in any case the café is in competition with other businesses.”
“18. At the relevant times, CIC was funded primarily by three government agencies: the Skills Funding Agency ('SFA'), the Education Funding Agency ('EFA') 6 and the Higher Education Funding Council for England ('HEFCE'). The appeal relates to courses funded by the EFA and SFA, referred to the in the Decision collectively as 'the funding agencies'. The EFA funds the provision of education and vocational training for students aged 19 and under, certain categories of students aged over 19, and students with learning difficulties aged between 19 and 25. The SFA funds all or part of the provision of education and vocational training for students aged 18 and over who have not achieved a specified level of academic qualification, or who are entitled to free education or training ([31]-[33]). 19. CIC receives tuition fees for other students who are not eligible for EFA, SFA or HEFCE funding ([35]). 20. CIC's annual income is approximately£40m . EFA funding amounts to approximately£19.7m ; SFA funding, to approximately£4.7m ; HEFCE funding, to approximately£7.5m . Fees charged to international students who are not entitled to EFA, SFA or HEFCE funding amounts to approximately£700,000 . CIC also generates approximately£3.7m income per annum from activities other than the provision of education and vocational training (including rental of studio and other space) ([30] and [32]-[36]). 21. CIC enters into agreements with the EFA and the SFA each year in relation to the funding the agencies provide. The agreements are in standard form, are not negotiable, and incorporate by reference a series of other documents which collectively set out the basis on which funding is provided and the obligations placed on the college to deliver education and vocational training. The agreement with the EFA is entitled 'Conditions of Funding Agreement'; the SFA agreement, 'Financial Memorandum' ([37]-[38]). … 29. The funding summary exhibit to Gary Horne's witness statement elaborates on the funding process as follows. In January/February of each year the SFA uses current performance data to inform the calculation of allocation for the following year. Colleges are required by the SFA to submit a funding claim based on in year performance from the February return. Colleges are required to project forward based on their current enrolment and assumptions on likely retention rates using historical trends. Then in March the SFA sends its funding allocation statement for the following year. There is generally a caveat to state the allocations are subject to change ahead of the year commencing so for example on28 July 2015 the allocation was reduced by 3% ahead of the 1 August start date. From August onwards SFA sends the final allocation. Variations through the year are also sent where in-year over- performance or under- performance can be reflected in increased or decreased allocations for apprenticeships subject to business case reviews. 30. Where students are fully funded by the EFA or the SFA, the fee set out on the Receipt is the baseline funding amount per student for that course. The actual amount paid for that student by the funding agencies will depend on their respective funding formulae. The actual funding received by CIC from the EFA to deliver its courses could be more or less than the aggregate of the amount stated on the Receipts issued for EFA funded courses. Similarly, the amount received by CIC from the SFA (together with any fees charged to the student) in any year would not exactly match the aggregate shown on the Receipts issued in respect of SFA funded courses ([50]-[51]).”
“76. … There are four important features of the agreements, in our judgement, which provide the answer to the question. 77. First, although the agreements did not state in terms which courses CIC was to provide, they did restrict the funding to courses within a list on the Government's website. The essence was that the funding was for those courses; CIC was not at liberty to do anything else with the money. 78. Secondly, the amount paid was by way of formula and not negotiated. (There was some room for negotiation if larger student numbers were anticipated for some reason, but that did not arise in the periods considered by the FTT and that anyway was an exception to the general rule.) The use of a formula is not itself a basis for concluding that the payments are not consideration, as Rayon d'Or shows. But in this case, the components of the formula give clues as to what the grant payment were for. The starting point was a "per student" amount (of£4,000 ); the number of students was based on the last year's intake, used as a proxy for the expected number of students in the current year; there were a number of adjustments to be made which related to the courses themselves - mostly reflecting the higher costs of providing courses (or certain types of courses) to students within the catchment of CIC. The formula was therefore highly specific to CIC's outputs - to the number of students, the type of students, the number of courses and the type of courses. 79. Thirdly, one way or another, CIC would have to pay back any part of the grant funding which was not used for supplying the courses as anticipated at the beginning of the year. ... 80. Fourth, in order to give the funding agencies full sight of its activities, and to permit accurate application of the relevant funding formulae, CIC submitted an ILR for each student on a monthly basis, comprising over 200 fields of data for each student. The ILRs were required under the agreements. By them, the funding agencies were given detailed information about how the funds are being spent by CIC. With that information, the funding agencies were able to adjust their payments to match that data and according to the standard formula. With that information, the funding agencies were able to see how their grant funding had been spent. 81. Taken together, we conclude that these features, all contained within the agreements, seen in context, indicate the existence of a direct link between the grants coming into CIC and the courses provided to CIC's students for free. We accept, of course, that the link could have been more direct than it was: the funding was not specific to any particular course or courses, it did not reflect the specific costs of any particular course, nor did it identify the particular students who would take those courses. But the law does not require such a degree of specificity; the concept of "direct link" encompasses a range of possibilities.”
“26. In that regard, the application of the exemption for activities ‘closely related’ to education is, in any event, subject to three conditions, laid down, in part, in Articles 132 and 134 of Directive 2006/112. In essence, first, both the principal supply and the supplies of services closely related to it must be provided by bodies referred to in Article 132(1)(i) of that directive; secondly, those supplies of services must be essential to the exempt activities; and, thirdly, the basic purpose of those supplies of services must not be to obtain additional income for those bodies by carrying out transactions which are in direct competition with those of commercial enterprises liable for VAT (see, to that effect, judgments of14 June 2007 , Horizon College , C‑434/05, EU:C:2007:343 , paragraphs 34, 38 and 42, and25 March 2010 , Commission v Netherlands , C‑79/09, not published, EU:C:2010:171 , paragraph 61). … 28 As regards the second condition, it follows from paragraph 39 of the judgment of 14 June in Horizon College (C-434/05, EU:C:2007:343 ), that, in order to be classified as supplies of services essential to the exempt activities, those supplies must be of a nature and quality such that, without recourse to them, there could be no assurance that the education provided by the body referred to in Article 132(1)(i) of Directive 2006/112 and, consequently, the education from which their students benefit, would have an equivalent value. …. 29. In the present case, it is apparent from the order for reference that the practical training was designed to form an integral part of the student’s curriculum and that, if it were not provided, students would not fully benefit from their education. 30. In that regard, the order for reference notes that the catering functions of the restaurant are all undertaken by students of the College, under the supervision of their tutors, and that the purpose of operating the College’s training restaurant is to enable the students enrolled in catering and hospitality courses to learn skills in a practical context. 31. The same applies to the performing arts courses. The College, through the students enrolled on those courses, stages concerts and performances to enable the students to acquire practical experience. 32. It must be stated that, without these practical aspects, the education provided by the College in the fields of catering and hospitality and of the performing arts would not have an equivalent value. 33. That finding is corroborated by the assertion of the United Kingdom of Great Britain and Northern Ireland that the College’s training restaurant is tantamount to a classroom for the students, and the assertion of the European Commission that students benefit from preparing meals and performing table service in a real-life setting, which is an important part of their education. 34. In those circumstances, it appears that the supplies of restaurant and entertainment services at issue in the main proceedings must be regarded as essential to guaranteeing the quality of the principal supply of education provided by the College. 35 As regards the third condition, it must be noted that that condition is an express enunciation of the principle of fiscal neutrality, which precludes, in particular, treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, to that effect, judgment of14 June 2007 , Horizon College , C-434/05, EU:C:2007:343 , paragraph 34 and the case-law cited). 36 In the main proceedings, it is common ground, first of all, that the restaurant and entertainment services provided by the College are open only to people previously registered on a mailing list held by that establishment. In particular, the referring court has stated that, for the performances, the audience usually consists of the friends and family of the College students, as well as people previously registered on the College's database. 37 Further, the College's training restaurant is available only by reservation and upon the condition that it be fully booked, with a minimum of thirty covers being required for the students to obtain maximum benefit from their supply of services. Thus, meals are cancelled if the required threshold is not reached, unlike in a commercial restaurant where reservations are in principle unconditionally honoured. 38 Lastly, it is clear from the information provided by the referring court that the concerts, performances and restaurant services are entirely organised, carried out and supplied by students enrolled at the College, a situation which is fundamentally different from that of students undertaking an internship in a commercial entity, where they join a professional team supplying such services in the competitive conditions prevailing in the respective markets. 39 It thus appears that the services offered by the College, as part of the courses taught to its students, to a limited number of third parties, are substantially different from those habitually offered by a commercial theatre or restaurant and are aimed at a different public, in that they do not meet the same needs of the consumer. 40 Furthermore, it is not disputed that the prices charged by the College cover only 80% of the cost of the meals. It does not therefore appear that the services at issue in the main proceedings are intended to generate additional income for the College by carrying out transactions in direct competition with those of commercial enterprises subject to VAT, such as restaurants or theatres. 41 Consequently, the services offered by the College to a limited number of third parties do not appear to be comparable to those offered by commercial restaurants and theatres, and the exemption from VAT for services supplied by the College does not amount to a difference in tax treatment. 42 Lastly, it must be borne in mind that it is for the national court to ascertain, on the basis of the guidance provided by the Court, that those conditions are indeed satisfied in the light of the factual circumstances of the case before it. 43. In the light of all the foregoing considerations, the answer to the questions referred is that Article 132(1)(i) of Directive 2006/112 must be interpreted as meaning that activities carried out in circumstances such as those at issue in the main proceedings, consisting in students of a higher education establishment supplying, for consideration and as part of their education, restaurant and entertainment services to third parties, may be regarded as supplies ‘closely related’ to the principal supply of education and accordingly be exempt from VAT, provided that those services are essential to the students’ education and that their basic purpose is not to obtain additional income for that establishment by carrying out transactions in direct competition with those of commercial enterprises liable for VAT, which it is for the national court to determine.”