Public funds received by education institutions

HMRC has confirmed its view that public monies received by further education institutions to fund education to 16 to 19 year olds are grants and the activity funded is outside the scope of VAT. However before the Upper Tribunal Colchester Institute Corporation successfully argued that the monies represented third-party consideration paid from the public purse to enable it to educate a particular group of students. It is therefore within VAT but exempt under VATA 1994 Sch 9 group 6 item 1.

HMRC has not appealed this part of the decision because it was successful on other grounds. But the department is taking steps to test the primary decision on the treatment of public monies through a new appeal. In the meantime it will not impose the decision on any further education institution but it remains open to institutions to...