HIBT Ltd v  Revenue & Customs [2007] UKVAT V19978 (17 January 2007)

19978
VALUE ADDED TAX – Exemptions – Education – Company in the business of providing educational courses to fee-paying students – Recognition Agreement between company and university – Whether supply of educational courses by company exempt – Whether educational courses supplied by eligible body – Whether company a college of a university – Value Added Tax Act 1994, Sch 9, Group 6, item 1, note (1) – EC Council Directive 77/388, art 13A(1)(i), (2)(a) – appeal allowed

LONDON TRIBUNAL CENTRE						   LON/2005/1029

HIBT LTD	Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS	Respondents

Tribunal:	ADRIAN SHIPWRIGHT (Chairman)
CYRIL SHAW

Sitting in public in London on 7 and 8 September 2006

Jonathan Peacock QC, Counsel, for the Appellant

Jeremy Hyam, Counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

Introduction
1.	This is an appeal by HIBT Limited (trading as Hertfordshire International College of Business and Technology) (“HIBT”) against a decision by the Respondents (“HMRC”) refusing exemption for HIBT’s supplies. The parties agreed the decision appealed against was contained in a letter dated 7 September 2005.  This is a decision in principle.
The Issue
2.	The issue in this case is whether the supplies made by HBIT are exempt supplies within Group 6 schedule 9 VATA. This raises a number of questions including the following:
(1)	Was there a supply of education?
(2)	Was there a supply of University Education?
(3)	Was the supply by an eligible body?
The Law
3.	The relevant provisions in the Sixth Directive are found in Article 13 which, so far as relevant, read as follows:
“Exemptions within the territory of the country
A	Exemptions for certain activities in the public interest
1  Without prejudice to other Community provisions, member states shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse—
….
(i)	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, provided by bodies governed by public law having such as their aim or by other organisations defined by the member state concerned as having similar objects;
(j)	tuition given privately by teachers and covering school or university education;
…
(a)	Member States may make the granting to bodies other than those governed by public law of each exemption provided for in 1(b), (g), (h), (i), (l), (m) and (n) of this Article subject in each individual case to one or more of the following conditions:
—	they shall not systematically aim to make a profit, but any profits nevertheless arising shall not be distributed, but shall be assigned to the continuance or improvement of the services supplied,
—	they shall be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned,
—	they shall charge prices approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to value added tax,
—	exemption of the services concerned shall not be likely to create distortions of competition such as to place at a disadvantage commercial enterprises liable to value added tax.
(b)	The supply of services or goods shall not be granted exemption as provided for in (1)(b), (g), (h), (i), (l), (m) and (n) above if:
—	it is not essential to the transactions exempted,
its basic purpose is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax”.

4.	This is translated into UK law by Group 6 Schedule 9 VATA which so far as is relevant reads as follows:
“Group 6 — Education
Item No
1 The provision by an eligible body of—
(a)	education;
(b)	research, where supplied to an eligible body; or
(c)	vocational training.
2 The supply of private tuition, in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer.
3 The provision of examination services—
(a)	by or to an eligible body; or
(b)	to a person receiving education or vocational training which is—
(i)	exempt by virtue of items 1, 2, 5 or 5A; or
(ii)	provided otherwise than in the course or furtherance of a business.
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—
(a)	a school within the meaning of The Education Act 1996, the Education (Scotland) Act 1980 the Education and Libraries (Northern Ireland) Order 1986 or the Education Reform (Northern Ireland) Order 1989, which is…—
(b)	a United Kingdom university, and any college, institution, school or hall of such a university;
(c)	an institution—
(i)	falling within section 91(3)(a) or (b) or section 91(5)(b) or (c) of the Further and Higher Education Act 1992; or
(ii)	which is a designated institution as defined in section 44(2) of the Further and Higher Education (Scotland) Act 1992; or
(iii)	managed by a board of management as defined in section 36(1) of the Further and Higher Education (Scotland) Act 1992; or
(iv)	to which grants are paid by the Department of Education for Northern Ireland under Article 66(2) of the Education and Libraries (Northern Ireland) Order 1986;
(d)	a public body of a description in Note (5) to Group 7 below; …
(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;
(f)	a body not falling within paragraphs (a) to (e) above which provides the teaching of English as a foreign language.
(2) A supply by a body, which is an eligible body only by virtue of falling within Note (1)(f), shall not fall within this Group insofar as it consists of the provision of anything other than the teaching of English as a foreign language. …
(4) “Examination services” include the setting and marking of examinations, the setting of educational or training standards, the making of assessments and other services provided with a view to ensuring educational and training standards are maintained.
…
Authorities
5.	A bundle of authorities was produced. The bundle included the following cases.
SUFA [1989] ECR 1737
Marleasing [1990] ECR  1-4135
Bulthuis-Griffioen v Inspektor der Mozebelasting [1995] STC 954
Blasi v Finanzamt Munchen [1990] STC 336
HMCE v The Civil Service Nation Association Limited [1998] STC 111
Pilgrims Language Courses Limited v HMCE [1999] STC 874
Commission v France Case C -- 76/99
HMCE v School of Finance and Management [2001] STC 1690
Expert Witness Institute v HMCE [2002] STC 40
Evidence
6.	A bundle of documents was produced. No objection was taken to any of the documents and they were all admitted in evidence.
7.	Certain further documents were produced during the course of the hearing. They were all admitted without objection. They included what was labelled page 251A, headed “Email Letter – UH Conditional Offer for HIBT Diploma”, and is set out below.
8.	Oral evidence was given by:
(1)	Kerry Patrice Hutchinson, the managing Director of HIBT;
(2)	Thomas Hanahoe, Pro Vive-chancellor of the University of Hertfordshire (“the University”) from 1991 until his retirement on 31 December 2005; and
(3)	Wendy Maria Purcell, a Deputy Vice-Chancellor of the University and Professor of Biomedical Sciences.
9.	Witness Statements were produced for all them. These were admitted as evidence in chief. The witnesses all gave oral evidence and were cross-examined.
Findings of Fact
10.	From the documents and oral evidence we make the following findings of fact.
HIBT – Company Matters
11.	HIBT is a company incorporated in England under the name HIBT Limited. It was incorporated on 25 June 2004 with Company Number 04097787 as a private limited company with a share capital.
12.	HIBT is a 100% owned by IBT(UK) Pty Ltd, an Australian company, which in turn is owned by IBT Education Limited, an Australian Listed public company.
13.	HIBT operates in the UK on the University of Hertfordshire, Hatfield College Lane Campus. 
HIBT – Business
14.	  HIBT carries on business providing services to international students in the educational sphere.
15.	Kerry Hutchinson told us that “the College was established in 2000 and operates as a typical IBT university college which means being located on the host university’s campus and being involved in ongoing collaboration with the administrative, international marketing and academic areas of the host university”. We find this as a fact.
16.	She said that “… in summary the College [ie HIBT] undertakes to provide personalised, flexible education pathways that are accepted and recognised by the host University as having equivalence to university level (undergraduate first year and post graduate pre-masters) study pathways to students who are not able to access a university degree programme via standard entry pathways”.  We also find this as a fact.
University of Hertfordshire
17.	The University is a statutory body.  It became a university in 1992.  It includes what was formerly Hatfield Polytechnic.
18.	It has two campuses in Hatfield at College Lane and de Havilland. They are less than a kilometre apart and connected by cycle ways and buses.
19.	The university has a third campus in St Albans.
The Recognition Agreement
20.	HIBT entered into an agreement with the University in 2005. It is called a Recognition Agreement. This is to be contrasted with an Admission Agreement (which this was not) simply designed to encourage recruitment rather than agreements that require specific credit etc (see paragraph 3.6c of the Collaborative Provision self Evaluation Document (“CPSED”).
21.	The Recitals to the Recognition Agreement setting the scene provide:
(A)	“The University and HIBT have entered into a cooperative arrangement pursuant to which HIBT offered a range of educational services to students and the University provided HIBT with services and facilities to assist in the provision of those services.
(B)	The University agrees that with effect from the Effective Date HIBT shall be an Associate College of the University due to the nature and success of the collaborative arrangement between the Parties.
(C)	The Parties have agreed to enter into a recognition agreement whereby in consideration of the University undertaking an Articulation Review (as defined hereafter) HIBT agrees to offer various programmes whereby Students from HIBT who have Successfully Completed the Stage 2 Diploma Programmes, and/or the Stage 3 Advance Diploma Programme (as defined hereafter) shall enter into the second year (level 2) to the corresponding Undergraduate Programme and Students from HIBT who have Successfully Completed the PQP shall enter the first year of the Graduate Programme (all as defined hereafter)…”
22.	The phrase “Associated College” is defined in the Recognition Agreement as “a college which has been so designated by the University in recognition of long standing and successful collaboration between the college and the University and the nature the educational activities undertaken by the College".
23.	The Recognition Agreement also contains the following definitions:
(1)	“Articulation Review" means the process whereby the University reviews the ability of HIBT to deliver the PQP, Stage 2 Diploma Programmes and Stage 3 Advanced Diploma And Programmes, including whether HIBT has the requisite staff, physical resources, and administration academic resources, and the University determines whether such delivery of HIV tea articulate appropriately with the Undergraduate and Graduate Programmes at the University.
(2)	"Graduate Programmes" means the graduate programmes of the University as identified in Schedule 1 and which had been identified by the University as articulating with the respective PQP.
(3)	"PQP" means the master level prequalifying programme courses and conditions which have been evaluated by the University and accepted as being an approved pathway whereby Students who have Successfully Completed their study at HIBT shall enter into postgraduate studies at the University in the academic field appropriate to the pathway course previously studied.
(4)	“Stage 2 Diploma Programme” means the HIBT pathway courses and conditions which have been evaluated by the University as being an approved pathway which Successfully Completed enables Students to commence the second year of undergraduate study in the respective Undergraduate Programme at the University.  “Stage 3 Advanced” Diploma Programme is similarly defined.
(5)	"Successfully Completed" means, as the context provides, a Student who has met the learning outcomes of the PQP, the Stage 2 Diploma or the Stage 3 Advanced Diploma respectively, achieved a pass mark in all modules (all as detailed in Schedule 2), has met the appropriate English-language requirements of the University and abided by the University's Policies and Regulations.
(6)	"University Policies and Regulations" means or any of the policies, procedures and regulations (including academic quality assurance procedures) approved by the University from time to time in which relates directly or indirectly to the programmes under this agreement.
24.	Clause 2.1 provides that the Parties have agreed that HIBT shall provide pathway programmes whereby students who have Successfully Completed such programmes shall proceed onto year two (2) of the respective Undergraduate Programme or year one (1) of the Graduate Programmes at the University.  By clause 2.2 the criteria for the Successful Completion are as has been set out Schedule 2.  It is also stated “Pathway programmes, referred to … as any of Stage 1 Certificates, Stage 2 Diploma Programmes, Stage 3 Advanced Diploma Programmes or PQP.”
25.	By clause 2.3 "The University agrees to accept:
2.3.1 all Students who have:
(i)	both received a conditional offer from the University and Successfully Completed the Stage 3 Advanced Diploma Programme into the second year of the relevant Undergraduate Programme (with the appropriate APL [accreditation of prior learning] credits) provided by the University during the Academic Year in which the Student successfully complete the stage 3 Advance Diploma Programme, or
(ii)	both received a conditional offer from the University and Successfully Completed the Stage 2 Diploma Programme into the second year of the relevant Undergraduate Programme provided by the University in the Academic Year immediately following the Academic Year in which the student successfully completes their Stage 2 Diploma Programme, and,
2.3.2 all students who have both received a conditional offer from the University and Successfully Completed the PQP, into the first year of the respective Graduate Programme provided by the University in the Academic Year immediately following the Academic Year in which the Student successfully completed the PQP.”
26.	By Clause 3 HIBT is to provide the Academic Services relating to Students contained in the agreement to the standards set out by the relevant benchmarking institution and is to work cooperatively with the University to support the University in meeting its obligations under the QAA Code of Practice.  The academic services are to include:
(1)	handling student inquiries pertaining to the PQP, Stage 1 Certificate, Stage 2 Diploma Programme and/or Stage 3 Advance Diploma Programme delivered under the agreement:
(2)	recruiting, selecting, registering an enrolment of suitably qualified students into the respective PQP, Stage 1 Certificate, Stage numeral Diploma Programme Stage 3 Advance Diploma Programme and in accordance with specified entry criteria;
(3)	producing information for students (either web based or in paper copy) about the Stage 1 Certificate, Stage 2 Diploma Programme Stage 3 Advance Diploma Programme and PQP subject to the licence granted by the University and restrictions on the use of the University's name and logo;
(4)	maintenance of Student records, including provision of Student data and transcripts to be University, to enable the University to register Student who has Successfully Completed the PQP, Stage 2 Diploma Programme Stage 3 Advanced Diploma Programme into either the Undergraduate Programme Graduate Programme of respectively at the University;
(5)	such other non-academic services as with detailed in a schedule.
Associated College status
27.	There is no doubt that the University regarded HIBT as an associated College of the University which was a higher category than a recognised institution.  There is seemingly no special constitutional arrangement for this.  We were shown no provision in the statutes establishing the University dealing with this.  However, it seems to be accepted in the academic world that this can be done.  We consider that what was done was sufficient to make HIBT an associated College of the University and so a College of the University.  We find this as a matter of fact. We also consider that it is a College of a University of the purposes of the notes to Group 6 of Schedule 9 VATA.
The Categories of Courses and Admissions
28.	There are essentially for categories of course provided by HIBT.  The are:
(1)	certificate courses giving, on successful completion, direct access to year one University,
(2)	diploma courses giving, on successful completion, direct access to year two University;
(3)	postgraduate courses giving on successful completion direct access the graduate student postgraduate study at the University; and
(4)	certain English as a foreign language courses.  This last group on the part of this appeal as they are covered by Note (1)(f) and are treated as exempt.
29.	We were told that the large majority of supplies were diploma courses.  Certificate courses we were told reported less than ten per cent of HIBT outputs.
University Credits
30.	HIBT courses give APL (accredited prior learning) credits at the University.  These are the University credits which count towards the University's degree.  So many credits are needed for the attainment of the degree.  The study at HIBT gives credits which count towards the attainment of a degree from the University of Hertfordshire.  Such education provided by HIBT thus leads directly to the attainment of a degree from the University of Hertfordshire through the attainment of credits.  A proper description of such education would be University education.  No evidence or argument was adduced to contradict this.  Accordingly, we find as a fact, the education which leads directly to credits for a degree awarded by the University of Hertfordshire is University education.
Offers, Identity Cards etc
31.	HIBT offers of admission are made with a conditional offer from the University.  The relevant letter reads as follows:
“EMAIL LETTER – UH CONDITIONAL OFFER FOR HIBT DIPLOMA
Application Number:

Dear [student name]
Re:  [degree programme]
Thank you for your application for the above course starting in September 2006.
After consideration by the Admissions Tutor we are pleased to confirm that you have been made an offer for the above course.
This offer is conditional on the following conditions:-
[Completion of your HIBT programme]
Once you have satisfied the above conditions, HIBT will complete an intra-university transfer from and pass it, along with your academic transcript, to International & Postgraduate Admissions:
International & Postgraduate Admissions
University Admissions Service
University of Hertfordshire
Student Centre, Mercer Building
College Lane
Hatfield
AL10 9AB

Please note that this is a conditional offer only.  When we receive evidence that you have fulfilled the academic conditions we will send you a Certificate of Acceptance, which you will need to begin your studies at Level 2 (2nd Year) of your nominated degree at the University of Hertfordshire.

Yours sincerely

International & Postgraduate Admissions
University Admissions Service”

32.	HIBT students were issued University of Hertfordshire Identity Cards.  Examples were produced to us.  HIBT Students were listed on the University’s Database.
SFM Factors
33.	Paragraphs [16] and [17] of the SFM case set out below list fifteen factors taken into account in that case. For convenience, we make the following findings of fact by reference to those factors.
Presence (or in this case absence) of a foundation document establishing the college as part of the University, by way of constitutional link.
(1)	There is no constitutional document produced to us establishing HIBT as a constituent member of the University. However, the Recognition Agreement does recognise HIBT as an Associated College as between the University and HIBT. This was also the position in SFM . The Recognition Agreement does provide a link establishing HIBT as a part of the University. 
Absence of independence
(2)	HIBT is a separate legal entity and in that sense there was no absence of independence. However, there is a close academic link between the University and HIBT exemplified by the Recognition Agreement and the way in which the two entities operated. Teaching on the courses in question has to be by staff approved by the University and in the case of the Law course is taught by the Law School of the University. The Credit system under which HIBT courses get credit towards a degree is a further illustration of dependency as is the conditional offer from the University made at the time of admission to HIBT.  The two institutions are interdependent. 
Financial dependence or interdependence 
(3)	HIBT had only one academic partner ie the University of which it was an Associated College.  In SFM there were three partners in five years but it was still a college of the relevant university.   HIBT needs the University to make its courses even more attractive.  The University is able to obtain more overseas students in this way which is financially advantageous.  The two institutions are financially interdependent.   
Absence of distributable profit 
(4)	As in SFM this is not so here. 
Entitlement to public funding 
(5)	As in SFM this is not so here as a matter of law. HIBT does not have any entitlement to public funding. Regrettably, fewer institutions today do have a right to public funding.
Permanent links between the college and the university 
(6)	As in SFM this is not so here as a matter of law. However, the Recognition Agreement requires a suitably long period of notice to be given.  It seems unlikely that the relationship would be served without good reason even if only because of the financial interdependencies. 
Physical proximity to the university of which it is said to be part 
(7)	In this case this was clearly the case. HIBT was located at the centre of the College Lane Hatfield campus.  It is at the heart of one of the Campuses.
Obligation to offer a minimum number of university places.
(8)	As in SFM this is not so here. 
(ix) Having a similar purpose to that of the university.
This was the case here. This is particularly so for the courses giving entry to year two and Post Graduate courses (see CPSED passim).
Providing courses which lead to a degree from the university. 
(9)	This was the case here. The APL credits are part of what leads directly to the attainment of a degree from the University.
Having such courses supervised by the university, and quality standards regulated by the university. 
(10)	This was the case here. The Recognition Agreement and the Articulation Review are designed to do just this.  Clause 3 of the Agreement, in particular, requires cooperation with the University to meet the required standards and the obligations under the University’s QAA Code of Practice.  They were members of the University and subject to its discipline (see CPSED particularly paragraphs 3.3, 3.4, 3.5 and 3.7).
Admitting students as members of the university, with university identity cards. 
(11)	This was the case here.
Submitting those students to disciplinary regulations and requirements of the university. 
(12)	This was the case here. There was an obligation to abide by the University’s Policies and Regulations.
(xiv) Entitling successful students to receive a degree from the university at the university degree ceremonies. 
This was the case here provided sufficient credits overall were obtained. The HIBT credits did count towards this.
(xv) Being described as an associate/affiliated college of the university.
This was the case here. The Recognition Agreement specifically provided for this.
The Submissions of the Parties
Submissions of HIBT
34.	In essence HIBT submitted that what HIBT did was “the provision by an eligible body of education” within Item 1 Group 6 Schedule 9 VATA and so was exempt.
35.	In more detail Mr Peacock QC submitted:
a.	HIBT is a “college of a university”.  This is not a defined term but it was self evident here that this was the case.
b.	Group 6 Schedule 9 VATA must be construed in the light of Article 13 from which it derives (see eg Blasi Finanzamt).
c.	Note 1(b) must be construed on the basis that it is the nature of the supply (‘Is it university education?’) and the object of the person concerned (‘Is it to provide university education?’) which are the facts to which regard can be had.
d.	The exemption here must be applied to the supply of university education by a body not governed by the public law with a ‘similar’ object or aim of providing university education.  It should not be narrowly construed but purposively (see Expert Witness).
e.	Accordingly, there is no requirement for the provider to be part of a university.  It merely needs to be a college of a university which School of Finance and Management shows need not be a commitment under the University.
f.	It is the nature of the services supplied and the inter-relationship between the supplier and the university that must be considered (see School of Management and Finance).
g.	HIBT satisfies this and is a college of university and supplies “university education”.  Accordingly, its supplies fall within Group 6 Schedule 9 VATA.

Submissions of HMRC in outline
36.	In essence HMRC submitted that: 
a.	There was no supply of University Education but a supply to bring an individual up to the requisite to embark upon university education.  It was the provision of access courses.
b.	HIBT was not an eligible body as it was not a college of a UK University.  It was essentially a stepping stone to university education.

37.	In more detail Mr Hyams submitted:
a.	HIBT is an independent entity which has an agreement with the University to provide pre-degree courses on the University’s Campus.  It does not lead directly to the conferral of a degree of the University.  It does not provide University education.
b.	The essential issue is the interpretation of “eligible body” in Item I Group 6 Schedule 9 VATA and in particular “any college of a university”.
c.	HIBT is not a college of the University.  There is purely a commercial relationship between HIBT and the University regulated by the Recognition Agreement (see School of Finance and Management).
d.	HIBT is not a body recognised under the Education (Listed Bodies) (England) Order 2004.
e.	The UK provision must be interpreted “through the law” of Article 13.  Article 13 A(i) is aimed at university education.
f.	Accordingly, HIBT and its services “do not fall within Note 1(b) to Item 1 of VATA 1994 Schedule 9 Group 6”.
 
Discussion
Introductory
38.	To fall within Group 6 Schedule 9 VATA there must be “the provision by eligible body of education”.  This raises the questions:
(1)	Was there a supply of education?
(2)	Was there a supply of University Education?
(3)	Was the supply by an eligible body?
Supply of Education?
39.	In the circumstances it is hard to see how the supplies by HIBT could be anything other than supplies of education. We find that they are supplies of education.  It is clearly what is supplied.
University Education?   
40.	 The requirement as we understand it is that there be a supply of education by an eligible body. Whether the supply is of University Education is strictly according to the UK wording a gloss.   However, bearing in mind that UK statutes implementing Directives should be construed in the light of the provisions they seek to implement we consider that education here means education equivalent to that provided by a university (see eg Blasi Finanzamt).
41.	The Diploma Courses (both Stage 2 and Stage 3) are equivalent to University education in the circumstances of this case.  Kerry Hutchinson’s evidence recorded at paragraph 16 above, which we accept, shows this to be the case.  We have found this as a matter of fact.  Further, they are supervised and monitored by the University and in some cases actually taught by a School of the University and in most cases by University approved lecturers who in many cases are also lecturers for the University.  The learning outcomes and syllabus are set out by the University which supplies the relevant IT.  
42.	The Certificate Courses are only a small percentage of the whole…  They have caused us some difficulty but we are persuaded they are equivalent to foundation courses (rather than access courses) provided at many of the newer universities.  We find as a fact that the Certificate Courses are the provision of University Education.
43.	We find as a fact that supplies in question made by HIBT are supplies of education and supplies of university education  within the meaning of Article 13.
Eligible Body?
44.	Burton J said that “a college of a university must, like the elephant, be recognised, if not defined.  He then considered the various factors raised by the parties at paragraphs [16 and [17] of his judgement in the SFM case. He said:
[16] They [ie The commissioners’ indicators] are as follows: (i) Presence (or in this case absence) of a foundation document establishing the college as part of the University, by way of constitutional link. The commissioners say that this is a necessary requirement for a college to be of the university. SFM agrees that there must be some specific relationship. In his supplementary skeleton, in fact, Mr Hyam articulated the necessity that the college must belong to the university by defining it as something that it possesses or which is in a ‘specified relationship’ to it; which perhaps suggested something less than a ‘constitutional link’. In this case SFM asserts a sufficient relationship by reference to the (unsigned) memorandum, upon which both parties operated. A college, SFM submits, may be an integral part of the university or it may have a looser relationship such as, as here, shared fees, shared training and management and a contractual framework. (ii) Absence of independence (not so in this case). This too is said by the commissioners to be a necessary condition. SFM is here a wholly independent legal entity (and a member of a group of companies). (iii) Financial dependence or interdependence (again not so here). Also said by the commissioners to be necessary. A college of a university should, be financially dependent upon the university (and/or upon Government funding) or at any rate, like the colleges of Oxbridge, financially inter-dependent. (iv) Absence of distributable profit (not so here). This again is said by the commissioners to be a necessary pre-condition. SFM submits that this would be relevant to qualification within note (1)(e) and not relevant to note (1)(b). (v) Entitlement to public funding (not so here). SFM is a private college. There was no evidence as to whether the University College Buckingham, which I understand to be a private university, has any entitlement to public funding. The issue appears to go rather to whether the college is governed by public law or subject to the Education Acts than as to whether it is or is not a college of a university, but the implication may be that it is the less likely that a college which is not entitled to public funding can be said to be of a university which is. (vi) Permanent links between the college and the university (not so here). The commissioners say that the college must be integrated into the administrative system of the university. SFM has had associations (though exclusively and successively) with three different universities in five years. (vii) Physical proximity to the university of which it is said to be part (not so here). SFM is based in London and is said to form part of the university, based in Lincolnshire and Humberside. Mr Hyam points to the other SFM centres, such as in Hong Kong, to which SFM’s response is that the only centre or campus being considered here for the purpose of VAT is the London campus, whatever may be the status of the others. SFM points to the features which apply to the students, irrespective of their presence in London rather than in Hull and Lincoln, set out as features (xii) to (xiv) below. Additionally there is some provision for interchange of students (who are all members of the university) between SFM and the university ‘proper’. I refer to the passages in the memorandum quoted at [4] above, in para 3 of the section headed ‘Responsibilities of the University’, and to the quoted paragraphs in respect of what occurs on termination and/or in the event of force majeure. These provisions formed the basis of oral evidence that was given. Mr Carr stated that the university would still have full responsibility, in the event of termination of the relationship, on the basis that SFM students were students of the university, to ‘teach out those students in place of SFM … [and] … complete the students’ course … by transferring them to Lincolnshire or sending the faculty down to London’. Further, although there would be no right for any student to have automatic transfer to a different programme, he confirmed that students of economics at the university could and did transfer from the university to SFM. As to geographical proximity, SFM points to the different definition in s 235 of the Education Act 1998 (albeit for quite different purposes) of a college ‘in a university’, to submit that college ‘of a university’ does not necessarily carry, a geographical connotation. (viii) Obligation to offer a minimum number of university places. This is of course absent in this case. All students are overseas students. SFM submits that this would be a very relevant indicator of the college’s not being, governed by public law and/or not within the Education Acts, but is not a material factor as to whether it is a college of a university.
SFM’s indicators.
[17] While accepting the arguable relevance of all the commissioners’ features, though not the conclusivity of any of them, SFM put forward its own seven features. None of them are in issue; the commissioners accept that all of them are arguably relevant, but, as set out above, submit that they are all outweighed in the final balance, and particularly so in the light of the fact that the first four of their own features, all of which are absent, are submitted to be conclusive. (ix) Having a similar purpose to that of the university. That is the provision of university education to its students. (x) Providing courses which lead to a degree from the university. (xi) Having such courses supervised by the university, and quality standards regulated by the university. (xii) Admitting students as members of the university, with university identity cards. (xiii) Submitting those students to disciplinary regulations and requirements of the university. (xiv) Entitling successful students to receive a degree from the university at the university degree ceremonies. (xv) Being described as an associate/affiliated college of the university. SFM accepts this could not be enough itself, as it would amount to pulling oneself up by one’s own boot straps. It relies on the fact that, as appears from the evidence of Professor Corfield (albeit that it was pointed out that there was no evidence adduced from an actual officer of the university, although Professor Corfield did not retire from the university until after the relationship had commenced to operate), the description of SFM as an associate college was known to, and may be said to have been agreed or approved, at any rate de facto, by the university. The commissioners however rely on the very use of the words associate before college, together with the reluctance of Mr Carr to accept the applicability of the word college of without the prefixing of the word associate, that such very coyness and circumlocution underlined the reality that SFM was not a college of the university.
45.	We have made findings of fact by reference to this (see above).  We find that HIBT is a college of a University.  We find this as a fact. 
Conclusion 
46.	 We have reached the following conclusions:
a.	Was there a supply of education?
We consider that in the context of the legislation there was a supply of education. 
b.	Was there a supply of University Education?
We consider that in the context of the legislation there was a supply of University education. 
c.	Was the supply by an eligible body?
We consider that in the context of the legislation there was a supply of education by an eligible body. 
The conditions for exemption in Group 6 Schedule 9 VATA are therefore fulfilled. 
47.	Accordingly, the appeal is allowed with costs.

ADRIAN SHIPWRIGHT

CHAIRMAN
RELEASE DATE: 17 January 2007

LON/2005/1029