As a broad overview, the Brockenhurst College Case considered whether supplies of chargeable catering & entertainment could be considered to be ‘closely related’ to the supplies of education being made to students of the college. In essence, the college operated a restaurant and charged for student-performed concerts. The CJEU ruled in favour of the college (despite the advocate general’s earlier contradicting opinion) and said that the catering & performance income could be deemed as part of the supply of education, therefore making the income VAT exempt. The college thus successfully obtained a repayment of overpaid output tax as a result.

The success of this case has prompted the consideration of applying this principle to many other organisations including the NHS, with arguments being proposed that income collected for car parking and catering (amongst others) is ‘closely related’ enough to the provision of healthcare – and therefore outside the scope of VAT (or exempt for non-NHS patients).

There are a number of things that would need to be considered:

o Concessions for parking income for example, where patients do not have to pay or get a reduced rate for parking whilst an inpatient

o Impact on partial exemption; resulting in past years’ needing to be re-calculated

o Repayment of any Input Tax reclaimed against these activities (off-setting some, if not all of the benefit of obtaining a VAT credit on overpaid output tax)

Trusts should therefore weigh carefully the losses and benefits together to determine the true net benefit that is being considered.

We recommend that where you do engage a 3rd party to investigate this on your behalf, you consider contracting for this on a contingent success base only (i.e. payment due on physical receipt of refund) and just as importantly – any fees are calculated on a ‘net’ result rather than solely on repayment of overpaid output tax for example. This is simply to reflect any partial exemption and input tax clawback that may outweigh or offset the refunded output tax.