Over the years, the First-Tier Tribunal (“FTT”) has decided on a wide variety of subjects that are normally taught in schools or universities, and whether they can qualify for the private tuition VAT exemption. Some of the areas considered included the teaching of yoga and belly dancing, both of which were unsuccessful in their tribunals. The private tuition VAT exemption hurdle has proved to be difficult to overcome.
In the FTT case of Anna Cook vs HMRC [TC07149], it was decided that the teaching of Ceroc dancing classes personally by Ms Cook was suitably broad and did qualify for VAT exemption. The decision explains that:
“The advertising of the events as fun and entertaining does not detract from the fact that the underlying purpose was to teach”
Accordingly, there was no requirement for Ms Cook to become VAT registered, and therefore to account to HMRC for any VAT in respect of the period in question. The appeal was allowed.
Ms Cook “made supplies” of Ceroc dancing classes to the general public. She operated as a sole trader, trading as “Ceroc Fusion” which was not VAT registered. Ceroc was explained as being “a brand, promoting and selling an evening of entertainment, socialising and dance tuition”.
In order to participate in the dance classes, customers were required to pay a nominal fee for life membership and a fixed fee for each class attended. Most venues used by Ms Cook provided a licensed bar which was advertised as an added attraction for customers, designed to maximise attendance at the classes.
An extensive syllabus was prepared which mirrored what the Department of Education had published for the National Curriculum syllabus for dance. This syllabus was developed in order to provide more credibility to the organisation as a serious teacher of dance.
HMRC considered that between the period of 2010 to 2012, income received was “VATable” and therefore an obligation to register for VAT took place. Ms Cook considered that the VAT exemption should apply to her services, set out in VATA 1994, Schedule 9, Group 6, Item 2:
“The supply of private tuition in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer.”
Accordingly, Ms Cook appealed HMRC’s decision.
A discussion took place, and a number of requirements were arrived at, in order for the activity to qualify for VAT exemption. These were that the subject / activity:
- Must be commonly taught in schools / universities;
- Is not limited to education which leads to an examination. It includes other activities taught in order to “…develop pupils’ or students’ knowledge and skills”;
- Should not be purely recreational; and
- Should be one of tuition i.e. a transfer of knowledge or skills.
Firstly, it was agreed between the parties that dance was taught in schools.
The two issues before the court were to decide whether teaching Ceroc should be considered:
- The same as teaching dance; and
- A purely recreational activity.
In connection with these two questions, the Tribunal Judge ruled that:
- It was considered to be the same as teaching dance, as it was held to be a “…methodology or an approach to teaching dance”; and
- It was not a purely recreational activity. The fact that advertising of the events concentrated on it being a social and fun event, did not:
“…detract from the fact that the underlying purpose was to teach dance. There is nothing wrong … with the idea that people will learn more if they are enjoying themselves” and
“The transfer of knowledge and skills from teacher to pupil … was a very significant part of what happened at a Ceroc event.”
Who is potentially affected?
This is a very interesting decision in light of previous appeals failing to win VAT exemption for the provision of private tuition.
The FTT suggests that there is a very fine line between a recreational event and an enjoyable educational event. Providing your case is presented well and you can demonstrate a clear intention to transfer knowledge from teacher to pupil, the VAT exemption is there for the taking.