A court ruling that upended a long-held understanding over the VAT status of FE colleges continues to “cast a long shadow” over whether they can claim discounts on large building projects, some four years after it was issued.
The ruling by judges in the Upper Tribunal of the Tax and Chancery Chamber in late 2020 undermined an established government policy that required further education colleges to pay VAT on most of their spending.
Their decision was the conclusion of a complex dispute between Colchester Institute and HMRC over whether the college could reclaim VAT on a £100 million building project dating back to 2008.
The wide-ranging impact of the ruling – which set a precedent for similar cases – appeared to be an unintended outcome of the college’s attempt to reduce its tax bill on building expenses between 2010 and 2014.
