Customs and Excise Commissioners v West Herts College: ChD 2001

West Herts College produced, printed and distributed prospectuses detailing its courses and facilities. The prospectuses were issued free to students and others. The expenditure producing the prospectuses had been treated by the Commissioners as expenditure in making both taxable and exempt supplies on the basis that a proportion of input tax on the goods and services used by the college in making both taxable and exempt supplies was attributable by operation of regulation 101 of the Regulations to the college’s taxable supply. The college sought in reliance on paragraph 5(1) of Schedule 4 to reclaim all of the input tax on the cost of producing the prospectuses. It succeeded in so doing before the VAT and Duties Tribunal.
Held: The Commissioners’ appeal was dismissed. The college argued (1) that the prospectuses were ‘goods forming part of the assets of [the college’s] business’, (2) that those goods had been ‘transferred or disposed of’ by the college so as no longer to form part of those assets and (3) that paragraph 5(1) was not disapplied by paragraph 5(5) in that the college was entitled, disregarding paragraph 5, to credit for part of the input tax on the supplies to it in connection with the production of the prospectuses because of the operation of regulation 101 and the treatment in the past of the college’s expenditure on producing the prospectuses as expenditure in making both taxable and exempt supplies: ‘Given therefore [that] what one was now looking at was a supply under paragraph 5(1), the only question is whether that is a taxable supply. If it is a taxable supply, the consequence follows that the whole of the input tax of the relevant goods and services has to be attributed under reg 101(2)(b) of the 1995 regulations to the making of that taxable supply. It plainly is a taxable supply, albeit zero-rated, since it is not an exempt supply. None of the exemptions in Sch 9 cover the issue of the prospectuses in question.’ The Commissioners raised two points. They challenged the proposition that paragraph 5(5) had no application, saying that for a credit to exist, to which paragraph 5(5) refers (and without which paragraph 5(1) will not apply), the credit must be for the purposes of the person’s taxable and not exempt supplies whereas the college’s prospectuses had been produced exclusively for the purpose of making the college’s exempt supplies of education. Having regard to the fact that the Commissioners had historically accepted that the expenditure in question was for both taxable and exempt supplies, the court said it was not open to them now to contend otherwise, and proceeded on the footing that the college was entitled to deduct part of the input tax on the supplies made to it with the result that paragraph 5(5) did not apply so as to prevent paragraph 5(1) from operating. The Commissioners also contended that the prospectuses were not goods forming part of the assets of the college’s business, disputing the existence of a separate supply. The submission was rejected: ‘I have therefore come to the conclusion that neither of the arguments presented attractively by [counsel for the Commissioners] succeeds. I do, however, agree with him that the result is an odd one. Paragraph 5 is, in broad terms, an antiavoidance provision, deeming something to be a supply (and therefore taxable if not exempt) which would not otherwise be a supply. It is odd that in the circumstance where a taxable person is partially exempt, it should have the effect of entitling that person to claim full input tax credit in respect of that supply without generating a corresponding and neutralising liability for output tax. The oddity however is mainly the result of the fact that the rate of output tax on the notional supply is zero, coupled with the fact that the commissioners had not established that the goods or services in respect of which the input tax is claimed as deductible, are used exclusively by the college for making its exempt supplies.’


Hart J


[2001] STC 1245


England and Wales

Cited by:

CitedChurch of England Children’s Society v Revenue and Customs ChD 29-Jul-2005
The Society sent out free newsletters to its unpaid fund-raisers and supporters. They sought to deduct input tax charged to them from the supplies associated with the costs.
Held: The Society might be able to deduct such tax as residual input . .
Lists of cited by and citing cases may be incomplete.


Updated: 13 May 2022; Ref: scu.230377