Partial exemption for higher education

HMRC have recently set out their policy on retrospective claims by higher education institutions that operated a partial exemption method agreed under the Committee of Vice Chancellors & Principals (CVCP) guidelines.

This article takes account of the tribunal decision in the cases of Wadham College Oxford & Merton College Oxford (20233).

Prior to 1997 when the CVCP guidelines were withdrawn many higher education institutions chose to determine their recoverable input tax using a simplified partial exemption method described in the guidelines as the CVCP method.

Recoverable input tax was calculated as a fixed percentage of the output tax payable on certain taxable supplies (known as tunnelled supplies).

For some the tunnels did not deal with all taxable supplies and they had the option to agree additional tunnels for any other supplies or if they preferred to agree their own special method instead.

In 2003...