Mistake to apply the Lennartz principle

The Colchester Institute Corporation provided education to more than 11 000 students. 

In 2008 the institute began a building project. At the time it was agreed that the supply of education was a non-business activity for VAT purposes. It claimed repayment of VAT under the Lennartz principle: it was able to recover input tax incurred ‘up front’ and account for deemed output tax on non-business supplies in future VAT periods.

In April 2014 the institute claimed a repayment of the output tax which it had paid in the previous four years on the grounds that the provision of education was a business activity because it received from funding from third parties. Given in that case the activities were exempt no output tax was due. HMRC would be unable to recover the Lennartz input tax because of the four-year cap (VATA 1994 s 80).

HMRC refused...