The First Tier Tribunal has released its judgment in the Wakefield College case in respect of the construction of a new building by the college and whether it qualifies as being used 'solely for a charitable purpose', or whether a proportion of business use prohibits this.

The College's original appeal was rejected by the First Tier Tribunal in January 2011 on the basis that some of the education in the building was a business activity. However, the Upper Tribunal referred the matter to the First Tier Tribunal to enable it consider the treatment of students who pay only part of the cost of their course and also whether any 'business' use of the building was de minimis.

The appeal concluded that part-payment of fees paid by students aged over 19 in England and over 18 in Scotland are to be treated as non-business income of the college. This includes where such fees are fully or partly remitted because of income support grants or are otherwise fully or partly reduced because they are grant supported.  The non-business use of the building or specific parts of the building will be significantly greater than any previous measurement of non-business use. As a result it is likely that VAT should not have been charged on the construction of parts of the building or in some cases the whole of the building. Colleges are able to undertake small amounts of business activity (no more than 5-) and still claim VAT relief on construction services on any part of the building.  

Therefore, if you have any clients who have constructed a new buildings in the education sector in the last four years and have paid VAT on the cost of construction, please contact our free helpline as it may be that a solution can now be found.

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