Application to cancel VAT registration

The taxpayer was a registered charity that provided training for young people with learning difficulties. This was funded by grant payments from Southern Regional College to the charity – no fees were charged to students. As part of the programme the charity sold meals prepared by the students to members of the public through a restaurant on its premises.

The taxpayer applied to deregister for VAT in February 2018 on the basis that it had not made taxable supplies. HMRC refused the request saying the payments made by the college to the taxpayer were outside the scope of VAT because it constituted non-business income. The taxpayer said the payments related to exempt supplies of education.

If the main supply of education was not exempt the meal sales could not be exempt and would therefore be standard rated. As a result the taxpayer could not deregister...