A recent Tribunal judgement in the Wakefield College case has important implications for the amount of VAT relief available to FE Colleges on the construction of new buildings.
The judge ruled that the part-payment of fees paid by students aged over 19 in England (over 18 in Scotland) should be treated as non-business income of the College. This is important because the construction of a new building can be zero rated if it is to be used “solely for a charitable (ie non-business) purpose”. Up to now HMRC has taken the view that whenever a college charges fees the education provided is a business supply.The effect of the ruling for Wakefield College meant that the building construction could be zero-rated because on the new basis the calculation was that the building would be used more than 95% for non-business purposes.
Many other FE Colleges are likely to be in the same position. Any college which has recently paid VAT on construction work of new buildings should review its position.