In HMRC v the Open University [2016] EWCA Civ 114 (2 March 2016), the Court of Appeal found that supplies by the BBC to the Open University (OU) were exempt supplies of education.
The appeal concerned a repayment claim (VATA 1994 s 80) of approximately £21m in relation to supplies of television and radio programmes by the BBC to the OU and relating to the OU’s courses. The issue was whether the supply by the BBC had fallen within the education exemption (VATA 1994 Sch 9 Group 6 Item 4).
During the entirety of the relevant period, the UK had failed to implement the Sixth Council Directive 77/388/EEC Art 13A correctly, in that it only exempted supplies ‘closely related’ to education if they were made by the same person who supplied that education. Article 13A had, however, had direct effect in the UK.
HMRC had always accepted that the OU had the educational aim required by Art 13A(1)(i); and that the services supplied by the BBC to the OU during the relevant period were closely related to the university education provided by the OU. The issues were whether, for the purposes of Art 13A(1)(i), during the relevant period: (1) the BBC had been a ‘body governed by public law’; and, if so, whether (2) it had had the requisite educational aim. If it did not satisfy both these conditions, nevertheless the issue was whether: (3) the BBC was ‘defined’ by the UK as having ‘similar objects’; or, if it was not so defined, whether it could still claim the direct benefit of the exemption.
The Court of Appeal referred to ‘the relevant and well established legal principle’ endorsed by the CJEU in Saudaçor (C-174/14). This said that a person which, not being part of the public administration, independently performs acts falling within the powers of the public authority cannot be classified as a body governed by public law. The court found that the fact that the Secretary of State, the Crown and Parliament may separately or together have been able to exercise a decisive influence over the BBC, being able to close it down by depriving it of finance or revoking its licence, was not determinative. What was critical was the independence of the BBC, so long as it remained in existence, in the production and content of its broadcasting and control over the deployment of its staff. The BBC was therefore not a body governed by public law.
In relation to (3), ‘similar objects’, the court noted that the essence of Art 13A(1)(i) was the imparting of knowledge, information and instruction with a view to educating and training the recipient and that there was no requirement for a two-way teacher/student exchange. The BBC provided the whole framework of facilities, teaching materials, technical resources, educational policy and organisational infrastructure to deliver its distance learning direct to children and young people and those seeking vocational training or retraining. The supply of education was therefore part of its objects.
The court did not reach a conclusion on the question of whether the UK had defined the BBC as having ‘similar objects’, as this was not necessary to decide the appeal.
Why it matters: The Court of Appeal stressed that the object of the education and training exemption was to increase access to education by avoiding the increased costs that would result if it was subject to VAT. To exclude the BBC from the exemption would therefore be both contrary to the objective of the Sixth Directive and contrary to the principle of fiscal neutrality.
In HMRC v the Open University [2016] EWCA Civ 114 (2 March 2016), the Court of Appeal found that supplies by the BBC to the Open University (OU) were exempt supplies of education.
The appeal concerned a repayment claim (VATA 1994 s 80) of approximately £21m in relation to supplies of television and radio programmes by the BBC to the OU and relating to the OU’s courses. The issue was whether the supply by the BBC had fallen within the education exemption (VATA 1994 Sch 9 Group 6 Item 4).
During the entirety of the relevant period, the UK had failed to implement the Sixth Council Directive 77/388/EEC Art 13A correctly, in that it only exempted supplies ‘closely related’ to education if they were made by the same person who supplied that education. Article 13A had, however, had direct effect in the UK.
HMRC had always accepted that the OU had the educational aim required by Art 13A(1)(i); and that the services supplied by the BBC to the OU during the relevant period were closely related to the university education provided by the OU. The issues were whether, for the purposes of Art 13A(1)(i), during the relevant period: (1) the BBC had been a ‘body governed by public law’; and, if so, whether (2) it had had the requisite educational aim. If it did not satisfy both these conditions, nevertheless the issue was whether: (3) the BBC was ‘defined’ by the UK as having ‘similar objects’; or, if it was not so defined, whether it could still claim the direct benefit of the exemption.
The Court of Appeal referred to ‘the relevant and well established legal principle’ endorsed by the CJEU in Saudaçor (C-174/14). This said that a person which, not being part of the public administration, independently performs acts falling within the powers of the public authority cannot be classified as a body governed by public law. The court found that the fact that the Secretary of State, the Crown and Parliament may separately or together have been able to exercise a decisive influence over the BBC, being able to close it down by depriving it of finance or revoking its licence, was not determinative. What was critical was the independence of the BBC, so long as it remained in existence, in the production and content of its broadcasting and control over the deployment of its staff. The BBC was therefore not a body governed by public law.
In relation to (3), ‘similar objects’, the court noted that the essence of Art 13A(1)(i) was the imparting of knowledge, information and instruction with a view to educating and training the recipient and that there was no requirement for a two-way teacher/student exchange. The BBC provided the whole framework of facilities, teaching materials, technical resources, educational policy and organisational infrastructure to deliver its distance learning direct to children and young people and those seeking vocational training or retraining. The supply of education was therefore part of its objects.
The court did not reach a conclusion on the question of whether the UK had defined the BBC as having ‘similar objects’, as this was not necessary to decide the appeal.
Why it matters: The Court of Appeal stressed that the object of the education and training exemption was to increase access to education by avoiding the increased costs that would result if it was subject to VAT. To exclude the BBC from the exemption would therefore be both contrary to the objective of the Sixth Directive and contrary to the principle of fiscal neutrality.
