Colchester Institute Corporation has recently been successful in its argument that its grant funded education was not non-business income but amounted to consideration for an exempt supply of educational services. This article looks at the potential implications of the case. The full case script is available here.
This is of most relevance to educational institutions that provide grant funded education but some concepts will apply to other charities that obtain grant funding.
The case revolved around a claim made by Colchester Institute for overpaid VAT. However, the wider issue for charities that receive grant funding is the VAT treatment applicable to grant funding that until now would have been treated as ‘non-business’ as not being treated as consideration for a supply of services (a ‘business’ activity).
This is an Upper Tier Tribunal decision that carries judicial precedent and could potentially lead to HMRC changing its interpretation on the VAT treatment of grant funding.
The decision could lead to a number of potential problems, including:
Please get in touch with Rob Warne, Kieran Smith or your usual VAT contact if you would like to discuss this further.