Summary of Court of Appeal Judgment

Factual and Procedural Background

The Appellants (Company A, Company B and Company C) are providers of higher education. The Respondent assessed VAT on supplies of education made by the Appellants in the period 1 December 2012 to 6 August 2017 ("the relevant period"). The core question was whether those supplies were exempt from VAT under Article 132(1)(i) of Council Directive 2006/112/EC ("the PVD") and/or Group 6 of Schedule 9 to the Value Added Tax Act 1994. The Appellants argued that the UK implementation (Group 6) failed properly to implement Article 132(1)(i) (including breaching the principle of fiscal neutrality) and, alternatively, that their supplies fitted within particular notes to Group 6.

The First-tier Tribunal (the FTT) dismissed the Appellants' appeals on 3 May 2023. The Upper Tribunal (the UT) dismissed the Appellants' appeal from the FTT on 24 March 2025 but granted permission to appeal to the Court of Appeal on three grounds (concerning fiscal neutrality and the scope of the Group 6 eligible-body provisions). The Court of Appeal (Judges Lewison, Miles and Henderson) heard the appeal and allowed it on ground 1, concluding that an earlier Court of Appeal decision (referred to in the judgment as "LIFE") was binding and required application of the consumer-perspective test to the supplier condition.

Legal Issues Presented

1. Whether supplies of education by the Appellants during the relevant period are exempt for VAT under Article 132(1)(i) of the PVD and/or Group 6 of Schedule 9 to the 1994 Act.
2. Whether the UK implementation (Group 6) complied with the EU principle of fiscal neutrality, i.e. whether exclusion of the Appellants from the exemption breached fiscal neutrality.
3. Whether certain Appellants qualified as "eligible bodies" within the notes to Group 6 such that their supplies should be exempt (including whether one Appellant was a college of a university, and whether the teaching of English as a foreign language gave broader entitlement to exemption).

Arguments of the Parties

Appellants' Arguments

• Attorney Shaw and Attorney Blades submitted that, for the supplier condition in Article 132(1)(i), the correct test for fiscal neutrality is the consumer-perspective test from Rank: two supplies that are identical or similar from the point of view of the typical consumer and meet the same needs cannot be treated differently for VAT purposes.
• The Appellants contended that their HNC and HND supplies were sufficiently similar to those of recognised exempt providers from the consumer perspective and that differences in regulatory regimes would not significantly influence the choice of the typical consumer.
• The Appellants argued that the UT and FTT erred in excluding the consumer-perspective test from supplier-condition cases and that, had that test been applied, the UK implementation would be found to breach fiscal neutrality.

Respondent's Arguments

• Attorney Hill and Attorney Inglis for the Respondent submitted that the Rank test does not apply to supplier-condition exemptions and that ECJ case law concerning supplier conditions requires assessment of the comparability of suppliers (including regulatory and legal frameworks), not merely consumer-perspective similarity.
• The Respondent relied on ECJ decisions concerning other sub-paragraphs of Article 132 and argued those authorities supported the UT and FTT approach.
• The Respondent accepted that the Court of Appeal decision in LIFE was inconsistent with its position but submitted that this court was not bound by LIFE for reasons addressed in argument.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court confined its analysis to ground 1 because it concluded that the decision in the earlier Court of Appeal authority (LIFE) was binding and dispositive. The Court summarised the legal framework: Article 132(1)(i) contains a supply condition and a supplier condition; Member States have discretion how to recognise non-public-law organisations but must respect EU principles including fiscal neutrality.

The UT had adopted an approach focusing on comparability of suppliers (taking account of regulatory and legal frameworks) and rejected the Appellants' submission that the issue should be assessed from the typical consumer's viewpoint. The Court reviewed the ECJ case law and the decision in LIFE, where the Court of Appeal had held that the Rank consumer-perspective test applies to a supplier-condition exemption (in that case Article 132(1)(g)).

The Court concluded (following LIFE) that the Rank test — assessing whether two supplies are identical or similar from the point of view of the typical consumer and meet the same needs, such that differences do not significantly influence consumer choice — applies to the supplier condition in Article 132(1)(i). Because the UT and FTT had proceeded on a different legal test, they had erred in law. The Court accepted the Appellants' submission (and noted the Respondent did not contest) that had the lower tribunals applied the Rank/LIFE approach they would inevitably have concluded that the UK implementation breached fiscal neutrality in excluding the Appellants.

The Court addressed arguments that it was not bound by LIFE but rejected them: it found the reasoning in LIFE to be transparent and part of its ratio decidendi and held that, absent recognised exceptions to following precedent, the Court was bound by LIFE.

Holding and Implications

APPEAL ALLOWED on Ground 1.

Holding: The Court held that the decision in the earlier Court of Appeal authority (LIFE) is binding and that the consumer-perspective (Rank) test applies to the supplier condition in Article 132(1)(i). The UT and FTT erred in law by applying a different comparability test focused on regulatory distinctions between suppliers.

Implications: The effect of this decision is that the appeal is allowed on ground 1; the Court did not express views on the merits beyond this legal conclusion and therefore did not decide grounds 2 and 3. The Court followed existing Court of Appeal authority and did not purport to create a new principle beyond applying LIFE.

Case Participants and Anonymised Roles

• Appellants: Company A, Company B, Company C (providers of higher education).
• Respondent: Respondent (tax authority).
• Judges: Judge Lewison, Judge Miles, Judge Henderson (Court of Appeal); Judge Rajah and Judge Sinfield (Upper Tribunal); Judge Cannan (FTT).
• Counsel and representatives: Attorney Shaw, Attorney Blades (for the Appellants; instructed by Company D and Company E); Attorney Hill and Attorney Inglis (for the Respondent; instructed by Company F).