Student union's VAT exemption challenge dismissed

13 Feb 2025Court Report

High Court dismisses a student union's challenge to HMRC's VAT classification of its cafe as a 'bar'

Background of the Case

The High Court recently addressed a legal challenge brought by the Anglia Ruskin Students' Union against His Majesty's Revenue and Customs (HMRC). The case revolved around the classification of a student union-run establishment, referred to as 'Café 92', and whether its operations qualified for VAT exemption under an extra-statutory concession.

The Issue at Hand

The central issue was whether Café 92, operated by the Anglia Ruskin Students' Union, should be classified as a 'bar' under the terms of HMRC's VAT Notice 709/1. This classification would exclude it from VAT exemption on supplies of catering, a benefit typically extended to student unions operating in conjunction with universities.

Legal Arguments

The Anglia Ruskin Students' Union, represented by Oliver Conolly, argued that Café 92 should not be considered a 'bar' as it primarily provided catering services. They contended that HMRC's interpretation was flawed and that the café should benefit from VAT exemption. Alternatively, they argued that if classified as a bar, HMRC's policy was irrational.

HMRC's Position

Represented by James Puzey, HMRC maintained that the term 'bar' should be understood in its ordinary sense—a place where alcoholic and non-alcoholic drinks are served. Based on this interpretation and the café's setup and advertising, HMRC concluded that Café 92 was indeed a 'bar', thus not eligible for VAT exemption on its catering supplies.

Court's Analysis

Mr Justice Saini, presiding over the case, considered the statutory framework governing VAT and the specific provisions of the extra-statutory concession. The court found that the term 'bar' should be interpreted in its everyday meaning, which includes places that serve drinks and food. The court noted that the café's own advertising and physical setup supported HMRC's classification.

Conclusion of the Court

The court dismissed the Anglia Ruskin Students' Union's claim, upholding HMRC's decision. It concluded that the café was correctly classified as a 'bar' and therefore did not qualify for VAT exemption under the concession. The court found no irrationality in HMRC's policy, as student unions are not 'eligible bodies' for VAT exemption on catering supplies.

Implications for Student Unions

This ruling underscores the importance of understanding the statutory language and HMRC's guidelines when it comes to VAT exemptions for student unions. It highlights the necessity for student unions to carefully evaluate their operations and align them with the legal definitions and exemptions available.

Future Considerations

The case serves as a reminder for student unions and similar entities to seek clarity on VAT implications and ensure compliance with HMRC's guidelines. The decision may prompt other student unions to reassess their VAT strategies and operational classifications.