2005 (10) TMI 514 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the College of Estate Management made a single (exempt) supply of education or also made a distinct zero-rated supply of books to its students.

Issue-wise Detailed Analysis:

1. Single Supply of Education vs. Distinct Zero-Rated Supply of Books:
The core issue in this appeal was whether the College of Estate Management provided a single supply of education, which is VAT-exempt, or if it also made a distinct zero-rated supply of books to its students.

Analysis:
- The college argued that it supplied both education and books (printed materials), with the latter being zero-rated, thus entitling it to deduct input tax attributable to that supply.
- The commissioners contended that the college made only a single supply of education, which is exempt from VAT, and thus, no basis existed for the college to recover input tax.

Relevant Legal Provisions:
- Article 13A(1)(i) of the Sixth Directive requires member states to exempt from VAT education and vocational training provided by certain bodies.
- The UK complied by enacting section 31(1) of, and Group 6 in Schedule 9 to, the Value Added Tax Act 1994, making the provision of education by an eligible body an exempt supply.
- Section 30(1) and (2) of the Act introduced the concept of zero-rated supplies, allowing taxable persons to treat zero-rated supplies as taxable supplies, thus entitling them to deduct input tax.

Tribunal and Court Findings:
- The VAT and Duties Tribunal found that the college provided a single supply of education, with the printed materials being ancillary to this supply.
- Lightman J upheld the tribunal's decision, agreeing that there was a single indivisible supply of education and examination services.
- The Court of Appeal, however, found that there were two distinct supplies: the exempt supply of educational services and the zero-rated supply of books, remitting the matter to the tribunal to apportion the students' fees between these supplies.

House of Lords Decision:
- The House of Lords disagreed with the Court of Appeal. It emphasized the need to take an overall view of the transaction and avoid over-zealous dissection.
- The tribunal's conclusion that the college made a single supply of education was upheld. The printed materials were integral to the provision of education and not a separate supply.
- The House of Lords restored the tribunal's decision, concluding that the college made no zero-rated supply of books.

Key Judicial Observations:
- The Court of Justice's principle in Card Protection Plan Ltd v. Customs and Excise Comrs was pivotal, emphasizing that a supply comprising a single service from an economic point of view should not be artificially split.
- The tribunal's findings were based on the fact that students sought the qualification offered by the college, which was the essential feature of the transaction.
- The provision of printed materials was a means to achieve the educational objective and not an end in itself.

Conclusion:
The appeal was allowed, and the decision of the tribunal was restored. The college was found to provide a single supply of education, exempt from VAT, and not a distinct zero-rated supply of books. The orders of Lightman J were restored, and the appeal was allowed with costs in the Court of Appeal and the House of Lords.