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Computing College Refused VAT Exemption

In a ruling with important tax implications for further education institutions, a leading computing college which awards diplomas to students that can count towards their degrees has failed to convince the Upper Tribunal (UT) that it should be viewed as a ‘college of a university’ and thus entitled to provide its services exempt from VAT.

The London College of Computing Limited (LCC) has close links to Middlesex University,, which permits LCC students to progress to the University’s degree programmes and to receive credits towards their degrees for diplomas obtained at LCC. On that basis, LCC argued that it was a college of a university and fell within the exemption contained within Group 6 of Schedule 9 of the VAT Act 1994.

LCC’s arguments failed before the First-tier Tribunal and, in dismissing an appeal against that decision, the UT found that it was not an ‘eligible body’ within the meaning of the Act. Despite the close co-operation between LCC and the University, their relationship was at arm’s length and there was no evidence that the University had acknowledged LCC as a college of the University.

Students did not become members of the University by enrolling with LCC and the tuition it offered could never lead to the award of a degree. The fact that many LCC students went on to study at the University with diplomas that were credited towards their degrees did not change the position and the UT noted that LCC was in a similar position to a school whose students satisfy the matriculation requirements of a university.