In an important case for educational institutions, a college is in line for a bumper tax rebate after convincing the Upper Tribunal (UT) that haute cuisine served at its top quality in-house restaurant, run by catering and hospitality students, is exempt from VAT.
MJ’s restaurant, at Brockenhurst College, offers fine dining that has been acclaimed by a number of celebrity chefs. The venue, which gives students a taste of working in the high-pressure environment of a busy kitchen, charges members of the public 80 per cent of the cost of their meals and makes no profit.
However, the college became embroiled in a long-running debate with HM Revenue and Customs (HMRC) after reclaiming almost four years-worth of VAT that it argued it had mistakenly paid on meals served at MJ’s. HMRC argued that the restaurant’s primary function was the provision of catering services to the public and that it was thus not eligible for exemption from VAT.
However, the college’s argument that the restaurant’s main purpose was to foster the better education of students succeeded before the First-tier Tribunal, which accepted that MJ’s was ‘tantamount to a classroom’ and that the practical experience afforded to students made them the ‘true beneficiaries’ of the venue.
HMRC’s lawyers argued that those who dined in the restaurant, who paid as little as £15 for a three-course meal, were ‘the direct users and consumers of the services in question’. However, in dismissing the appeal, the UT found that the restaurant was operated to ‘meet the educational needs’ of students.
Concerts and plays put on by performing arts students at the college, which were mostly attended by friends and family, were also ‘closely related to the provision of education’ and not subject to VAT on ticket prices, the UT ruled.