Students’ Unions exemption challenge lost

The High Court recently rejected a legal challenge brought by the Anglia Ruskin Students’ Union against HMRC. The High Court refused permission for judicial review of a HMRC decision that a students’ union-run establishment was a “bar”, and therefore was ineligible for VAT exemption under an Extra Statutory Concession (ESC).

Background

• ESC 3.35 allows students’ unions, guilds and associations to apply VAT exemption to student catering sales, aligning with the legal treatment by universities. This exemption was presumably introduced to ensure equitable VAT treatment.
• HMRC has not provided clear guidelines on what is covered (especially around venues), issued inconsistent rulings, and have revised their own guidance and the Public Notice, despite assurances that prior guidance was unequivocal. Universities can cater in licenced establishments, and such sales to students remain VAT exempt.
• Approximately four years ago, HMRC launched a campaign to challenge the VAT treatment of union catering. Our view has always been that non-catering items (e.g. bar snacks) should be excluded, while catering items (e.g. a plate of chips) are catering, irrespective of the venue type, as union venues are often multipurpose.
• As an ESC, the only legal recourse is a Judicial Review (JR). Co-ordinated by NUS and funded by a number of affected unions, a case led by Anglia Ruskin was heard this month by HMRC.
• The preliminary JR ruling determined that a bar remains a bar, even if catering is the predominant service. This effectiveness takes any catering sales in that venue out of the ESC.

What does this mean for your union / guild / association?

• It appears that legal redress is no longer available. NUS and its legal advisers have indicated that some of the initial comments by the judge regarding the outdated ESC wording may provide an opportunity to lobby your MP.
• The full judgement is not available yet, so we would suggest waiting for it before considering further action.
• For unions that have been assessed and paid these assessments, these matters now seem closed.
• For unions assessed and who have not paid, as a result of the NUS challenge, it may be best to await contact from HMRC. We trust such sums have already been provided for, but if HMRC contact is delayed, further interest may accrue. HMRC have stated that no penalties will arise; let us hope this is honoured.
• Many unions do not have any bar catering, but those that do and have never been contacted by (or been in contact with) HMRC on this issue need to consider their next steps carefully.

What should you do

No immediate action is recommended for most unions while we await the detailed judgement. If you would like to discuss your individual circumstances further, please contact Chris Dears or your usual Crowe contact.