St Patrick's International College v HMRC: Court of Appeal allows VAT education exemption appeal, bound by earlier LIFE decision

The Court of Appeal has allowed a group of private higher education providers to claim VAT exemption on their supplies of education, holding that it was bound by its own earlier decision even while acknowledging considerable force in the Revenue's contrary arguments.

In St Patrick's International College and others v HMRC [2026] EWCA Civ 852, three alternative providers challenged assessments covering December 2012 to August 2017, contending that Group 6 of Schedule 9 to the Value Added Tax Act 1994 had failed to implement Article 132(1)(i) of the Principal VAT Directive and breached the principle of fiscal neutrality. The providers, none of which held degree awarding powers or university title, offered higher national certificates, diplomas and degree courses comparable to those of universities and further education corporations.

The exemption for education carries two cumulative conditions: a supply condition and a supplier condition, the latter confined to public law bodies or organisations recognised by a Member State as having similar objects. It was common ground that the providers satisfied the supply condition and shared the educational aims of exempt bodies. The dispute concerned how similarity should be judged for the purposes of the supplier condition.

Before the First-tier Tribunal and the Upper Tribunal, the providers argued that similarity should be assessed through the eyes of the typical consumer, drawing on the test in Rank, so that regulatory differences invisible to a prospective student were immaterial. Both tribunals disagreed, holding that where a supplier condition applies the focus is on the comparability of the suppliers themselves, including the regulatory framework governing degree awarding powers, university title and, for further education corporations, charitable status. On that footing the providers were not comparable to the recognised bodies and the appeals failed.

The decisive authority had not been cited below. In Leisure, Independence, Friendship and Enablement Services Ltd v HMRC, known as LIFE, the Court of Appeal had considered the neighbouring welfare exemption in Article 132(1)(g) and held that similarity for fiscal neutrality purposes must be assessed from the point of view of the typical consumer, including in relation to the supplier condition. Giving the leading judgement, Miles LJ held that this proposition formed part of the ratio of LIFE, and it was common ground that the reasoning on Article 132(1)(g) applied identically to Article 132(1)(i).

HMRC accepted that LIFE was inconsistent with its case but argued that the court was not bound. Both arguments failed. The suggestion that the relevant paragraph of LIFE lacked a reasoned basis, or was reached per incuriam, was rejected, the court finding the reasoning transparent and identifying no legal rule of which the earlier court had been ignorant. The alternative argument, built on the primacy of EU law under Factortame, was misconceived: that principle governs conflicts between EU and domestic law, whereas here both parties relied on EU law and the only question was its correct interpretation. Where the court had already performed that exercise on the same body of Court of Justice authority, a later court was bound to follow it, not least because the possibility of a further appeal exists precisely for cases said to be wrongly decided.

Having concluded that the Rank test applied to the supplier condition, and HMRC not having disputed that its application would inevitably show a breach of fiscal neutrality in excluding alternative providers, Miles LJ allowed the appeal on the first ground, rendering the remaining grounds academic. He recorded considerable force in HMRC's position on the substance but declined to express a view, and Lewison LJ agreed that whether LIFE was right or wrong was not for this court to say.