SAE Education Ltd v HMRC: The Supreme Court overturns Court of Appeal judgment and paves the way for commercial higher education providers to claim VAT exemption

20 Mar 2019

SAE Education Ltd v HMRC

In a unanimous judgment handed down today, the Supreme Court overturned the judgment of the Court of Appeal and the decision of the Upper Tribunal and ruled that SAE Ltd, part of a global group of higher education providers, was entitled to claim exemption from VAT as a college of Middlesex University. The judgment reiterates that the policy objective of the exemption is to ensure that the VAT cost does not hinder student access to higher education, and concludes that denying exemption to providers on the basis that they are independent commercial entities would defeat that objective. The judgment will therefore be welcomed by thousands of university students in the UK.

The Supreme Court has provided much-needed clarity for those commercial higher education providers who must collaborate with UK universities because they do not have degree awarding powers. Its judgment effectively prevents HMRC from discriminating against profit-making providers on the basis that they do not have constitutional arrangements which are similar to those of Oxford and Cambridge colleges. There is no such “hard-edged” test, as previously found by the Court of Appeal. On the contrary, each case must be decided on its own particular facts and circumstances, having regard to the student-focused policy objective of the exemption.

A number of the infamous 15 “SFM Factors” have been jettisoned by the Supreme Court. Click here for a case note by Elizabeth Kelsey, junior counsel in the case, to see which of those Factors have survived.

Click here for the judgment.

Melanie Hall QC represented SAE Ltd and is currently advising commercial providers in a similar position.