- The First-tier Tribunal ruled on cases involving Derby College Group and Cornwall College about VAT treatment of government grants.
- Both colleges are further education corporations registered for VAT and considered eligible bodies for education and vocational training exemption.
- The colleges received most funding from government agencies, which merged into the Education and Skills Funding Agency.
- HMRC argued grants were consideration for taxable supplies, leading to output tax assessments.
- The Tribunal decided grants are not consideration for VAT purposes, referencing previous rulings.
- The decision means no output tax is due under the Lennartz mechanism, and the colleges won their appeals.
- HMRC has reserved its position, and the Court of Appeal will revisit the issue in 2026.
- The decision provides certainty for the sector, but vigilance and advice are recommended due to ongoing challenges.
Source: deeksvat.co.uk
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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