FTT – Derby College Group v HMRC – VAT Treatment of Government-Funded Education

First-tier Tribunal decision in Derby College Group v HMRC ([2025] UKFTT 00968 (TC)):

Key VAT Issue – “Consideration” for Free Education: The Tribunal considered whether government grants received by Derby College for providing free education and vocational training constituted “consideration” for VAT purposes. It ruled that they did not, following the precedent set in Colchester Institute Corporation v HMRC.
Appeal Succeeds – Assessments Overturned: As the grants were not deemed consideration, the Tribunal allowed the College’s appeal against HMRC’s VAT assessments totaling nearly £2 million, covering accounting periods from 2015 to 2018.
Funding Agreements and Educational Purpose: The College’s funding from government agencies (EFA and SFA) was based on standard, non-negotiable agreements tied to approved qualifications. The Tribunal emphasized that the College provided genuine education and vocational training, not taxable supplies.

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Taxable amount