St John's College Oxford v Commissioners for Her Majesty's Revenue and Customs
Decision date: 11 March 2010
Neutral citation: [2010] UKFTT 113 (TC)
Overall AI summary confidence: medium
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: medium
St John’s College appealed HMRC’s refusal to approve proposed partial exemption special methods (PESMs) for VAT recovery on a c.£6m refurbishment of its Senior Common Room and challenged HMRC’s handling of a voluntary disclosure under an approved Special Method Override Notice (SMON). The Tribunal held that free meals to Fellows formed part of the college’s non‑economic business (not a taxable supply), required a stage‑1 exclusion of non‑economic use before Article 17 apportionment, and found each proposed PESM unfair and unreasonable, dismissing that appeal. The SMON/voluntary disclosure could not be finally quantified on the evidence and was adjourned for further hearing to determine proper attribution and the amount of input tax creditable.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: high
The Tribunal’s decisive legal holding is that input VAT attributable to non‑economic (non‑business) use must be excluded first (stage‑1 business/non‑business apportionment) before any apportionment between taxable and exempt economic activities under Article 17; supplies forming part of an organisation’s non‑economic purpose (here, sustaining Fellows by providing free meals) are not taxable “private use” under Article 6 and so their input VAT must be disallowed prior to Article 17 calculations. Additionally, a PESM that fails to exclude non‑economic use or that misclassifies primary uses is not fair and reasonable and may be rejected.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal gave practical observations on apportionment—e.g. treating guestroom costs as deductible, apportioning kitchen costs between paid meals (deductible) and free Fellows’ meals (non‑deductible), and allocating other room costs by time/use and economic/non‑economic proportions—and noted limits on its power to devise an entirely new PESM while indicating it can quantify and adjust factual allocations within proposed methods.