College appeals VAT rating on new buildings

Following a decision by an HMRC tribunal at the beginning of last year that the construction of a new college building should not qualify for zero rating for VAT purposes, an appeal has been made by Wakefield College.

The decision by HMRC was made based on the intended purposes of the building. The decision that it should not qualify for zero rating was because it will not be used solely for relevant charitable purposes because of income from:

• Fee paying students
• A café in the building
• Hairdressing services provided by students

The activities above meant that the college was deemed to have ‘business activities’.

The college has appealed that decision, contending that even if it has business activities it does not necessarily follow that the building is disqualified from zero-rating. It is common ground that business use can be ignored if it is de minimis (of a minimal amount).

The appeal was allowed and we await the decision which could affect many other schools and colleges.

Contact us if you have any questions about the VAT rating on your school buildings or school construction projects.