Colleges Win £2.8 Million Tax Rebates Amid VAT Rule Dispute with HMRC

• Four colleges received tax rebates over £2.8 million before a Court of Appeal case on VAT rules affecting the FE sector.
• The appeal involves a dispute between Colchester Institute and HMRC about VAT discounts on building projects started before 2010.
• A win for Colchester Institute could allow colleges to reclaim VAT on projects for mixed student groups.
• Most FE colleges might face higher tax bills after losing certain charitable reliefs.
• An estimated 20 to 30 colleges could benefit if Colchester Institute wins.
• If HMRC wins, colleges may have to repay VAT adjustments already claimed.
• The Court of Appeal date was confirmed by a judge in the First-Tier Tribunal Tax Chamber.
• The four colleges involved are Colchester Institute, Portsmouth College, Cornwall College, and Derby College Group.
• Derby College Group received a £1.9 million VAT adjustment for spending between 2016 and 2018.
• The judge ruled in favor of the colleges, following a senior tax court’s 2020 ruling.
• Stuart Savage from RSM UK highlighted the broader importance of the issue to the sector.
• HMRC is expected to pursue the case to the Supreme Court, potentially resolving VAT rule uncertainties.
• The dispute began with Colchester Institute’s VAT claims on a 2008 building project using the Lennartz mechanism.
• The 2020 Upper Tax Tribunal ruling favored Colchester, changing tax treatment for grant-funded education.
• HMRC acknowledged the ruling but is appealing, leaving colleges to choose between old and new tax rules.

Source: feweek.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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