20 November 2018 
Andrea Marshall, Tax Specialist
On 30 October, the Supreme Court heard the appeal of SAE Education Limited. SAE’s litigation relates to the meaning of “college of a UK university” for VAT purposes, and has widespread ramifications for the wider private education sector, many of whom work in collaboration with universities. Whilst we await the formal decision, EY has offered immediate thoughts in light of their ongoing heavy involvement with clients that are affected. EY has confirmed that there appeared to be little to report which constitutes new arguments by either party.
Counsel for SAE focused on operational integration and the quality of the education provided as being key in determining whether a provider was “of” the university within the spirit and meaning of overarching EU law. Counsel for HMRC, as expected, sought, in return, to continue the integration debate along the lines of the Court of Appeal conclusion by limiting eligible body status to colleges that are a constituent part of the university in the constitutional or legal sense. Counsel also argued that UK law was aligned with EU law in drawing the line there, whereas SAE’s Counsel argued that it would be a breach of neutrality principles if the line excluded certain providers trading in the same market.
Whilst the ultimate decision in SAE may have retrospective impact, the position from August 2019 may become redundant for many providers that are approved (fee capped) should expected law change come into force that offers the exemption by default to such providers from that date (see our previous article). The relevance and importance of “college” status still remains however for many providers not subject to fee capped student loans, or for providers (such as foundation providers) that do not offer student loans at all.
It would be in a university's interests to at least understand the level of operational integration in place with providers offering collaborative provision, and the status of the provider in the eyes of the OfS, to determine whether or not a particular provider will be VAT exempt by virtue of law change from August 2019 and how this may impact current or future students of the university involved with that provider.
