Background
Three providers — St Patrick’s International College Limited, London College of Contemporary Arts Limited, and Interactive Manchester Limited — supplied HNC and HND courses funded through the Student Loans Company between 2012 and 2017. HMRC raised VAT assessments on the basis that the supplies were standard-rated. The providers appealed, arguing that the supplies were exempt on the grounds that they provided education similar to that offered by universities and further education bodies.The First-tier Tribunal and Upper Tribunal both dismissed the appeals. The providers then appealed to the Court of Appeal, arguing that the Upper Tribunal had erred by assessing comparability by reference to the regulatory framework rather than the similarity of supplies from a consumer’s perspective.
Court of appeal decision
The Court of Appeal allowed the appeal, confirming that the principle of fiscal neutrality applies where supplies are identical or similar from the perspective of the typical consumer and meet the same needs. Supplies should receive the same VAT treatment unless regulatory differences significantly influence consumer choice.The Court found that the providers' courses were sufficiently similar to those offered by universities and further education colleges, and that differences such as degree-awarding powers or university status were unlikely to influence consumer decision-making. Importantly, the Court’s decision was driven by an earlier ruling it was required to follow, rather than a full endorsement of the providers’ arguments, and the judges acknowledged that HMRC’s case had “considerable force,” which may be significant when the Supreme Court hears the appeal.
Practical impact
The decision significantly broadens the potential scope of the education VAT exemption. It suggests that alternative providers may qualify for the same exemption as universities and further education colleges where they offer comparable publicly funded courses, and it firmly rejects HMRC's focus on regulatory status as the determining factor.The decision concerns pre-Brexit periods in which taxpayers could rely directly on the Principal VAT Directive; its application to post-Brexit periods remains untested and uncertain.
HMRC response and next steps
HMRC has obtained permission to appeal to the Supreme Court and has confirmed in Revenue & Customs Brief 9 (2026) that it continues to regard supplies by non-eligible bodies as standard-rated. HMRC is not, therefore, applying the Court of Appeal decision at present.Importantly, however, HMRC acknowledges that providers may wish to protect their position and can submit repayment claims.
There are a few points to bear in mind regarding repayment claims. The standard four-year time limit applies to backdated claims, so any claim should be submitted as soon as possible to maximise potential recovery. Providers should also note that a shift from taxable to exempt can restrict input VAT recovery, so claims must be calculated on a net basis. HMRC has also advised that it will review claims on a case-by-case basis, taking into consideration unjust enrichment, partial exemption, and whether overdeclared VAT has been correctly accounted for across the supply chain.
Any repayments are therefore unlikely to be immediate, but lodging a protective claim now can safeguard your position while HMRC pursues its appeal to the Supreme Court.
How DWF can help
DWF can advise whether your supplies are comparable to those considered in the St Patrick’s International College case and assist with preparing and submitting protective repayment claims.
For further information or to discuss your position, please contact one of our experts.
