© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
H2c. Similar educational objects
General​
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- Commercial nature does not preclude activity being exempt
"[26] Concerning the purpose of the exemption provided for in point (i) of Article 132(1) of the VAT Directive, it is apparent from that provision that that exemption, by treating the supply of educational services more favourably for the purposes of VAT, is intended to facilitate access to those services by avoiding the increased costs that would result if the services were subject to VAT (see, to that effect, Case C‑287/00 Commission v Germany [2002] ECR I‑5811, paragraph 47).
[27] In the light of that purpose, it must be observed that the commercial nature of an activity does not preclude it from being, in the context of point (i) of Article 132(1) of the VAT Directive, an activity in the general interest (see Case C‑144/00 Hoffmann [2003] ECR I‑2921, paragraph 38; and Case C‑498/03 Kingscrest Associates and Montecello [2005] ECR I‑4427, paragraph 31)." (MDDP C-319/12)
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Requirement to have similar objects​
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- Exemption cannot apply to all educational services whatever the aims of the supplier
"[36] Therefore, an exemption, such as that at issue in the main proceedings, which applies generally to all supplies of educational services, whatever the aim pursued by the private organisations providing those services, is incompatible with point (i) of Article 132(1), as conceived by the European Union legislature." ​(MDDP C-319/12)
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- Private bodies must have similar objects
"[35] Under point (i) of Article 132(1) of the VAT Directive, the supply of educational services referred to is, however, exempt only if those services are provided by educational bodies governed by public law or by other organisations recognised by the Member State concerned as having similar objects. It follows that other organisations, namely, private organisations, must fulfil the condition of pursuing objects similar to those of bodies governed by public law. It is thus clearly apparent from the wording of point (i) of Article 132(1) that it does not permit Member States to grant the supply of the educational services exemption to all private organisations providing such services, by including also those whose objects are not similar to those of bodies governed by public law.
[36] Therefore, an exemption, such as that at issue in the main proceedings, which applies generally to all supplies of educational services, whatever the aim pursued by the private organisations providing those services, is incompatible with point (i) of Article 132(1), as conceived by the European Union legislature." (MDDP C-319/12)
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"[35] Indeed, as may be seen from the wording of Article 13A(1)(i), in order for the making available of teachers for the benefit of the host establishments to be exempted under that provision, it is necessary for the activity to be provided by a body governed by public law that has an educational aim, or by another organisation defined by the Member State concerned as having similar objects. As is apparent from the order for reference and, in particular, from the third question raised, that condition is likely to be satisfied in the main proceedings." (Horizon College C-434/05)
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- Similar objects refers to provision of education
"[89] HMRC contends that the expression "similar objects" at the end of the second part of Article 13A(1)(i) means "the same objects", in the sense that the "other organisations" must have the object of providing one or more of the six specified types of education in the Horizon College sense. HMRC contend that the FTT was wrong to decide otherwise. The UT did not address that point. HMRC's explanation for the use of the word "similar" is that, unlike public bodies or most public bodies, the principal aim of many private bodies is to make a profit and so it would be wrong to say that they have a purely educational aim." (HMRC v. Open University [2016] EWCA Civ 114, Etherton, Lewison LJJ)
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"[8] The PVD did not permit member state to give a general exemption for all supplies of educational services without regard to the objects pursued by the non-public organisation providing the service: [35],[39]. To qualify for the exemption, the body in question needed to be recognised by the member state as a body having objects which were similar to those of a body governed by public law having such as their aim (see Article 132.1(i)): [35]. (The word "such" refers back to "the provision of children's or young people's education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto"). I will call this "the PVD supplier condition"." (Finance and Business Training Limited v. HMRC [2016] EWCA Civ 7, Arden Golster, Sharp LJJ)
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- Including the organisational aspect
"[99] It is common ground, and was common ground before the FTT and the UT, that the requisite educational aim (and organisational framework) must be considered in relation to all the BBC's educational activities and not merely those which it provided for the OU. The FTT and the UT nevertheless reached different conclusions on whether the Horizon College requirements were met in the present case, the FTT deciding that they were not and the UT deciding that they were. I find that UT was plainly correct on this issue." (HMRC v. Open University [2016] EWCA Civ 114, Etherton, Lewison, Ryder LJJ)
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- Similar means the same: no reason for more generous test for private entities
"[93] In the first place, it seems to me that the natural reading of Article 13A(1)(b)(g)(h)(i) and (n) is to make a consistent distinction between public bodies, on the one hand, and private bodies, on the other hand. Secondly, I am doubtful that an interpretation of Article 13A(1)(i) which places in the second part of Article 13A(1)(i) certain public bodies as well as private bodies achieves fiscal neutrality if "similar objects" means something other than "same objects" in the sense I have mentioned. Such an interpretation would still mean that certain bodies operating in the same market, namely all those bodies falling within the second part of Article 13A(1)(i), would have to satisfy less rigorous conditions to obtain the benefit of the exemption. Thirdly, irrespective of the principle of fiscal neutrality, it makes no logical, economic or practical sense to make it easier for private bodies to claim the exemption than for public bodies, which have to satisfy the full requirements of the first part of Article 13A(1)(i). Mr Lasok advanced no justification for such a distinction." (HMRC v. Open University [2016] EWCA Civ 114, Etherton, Lewison LJJ)
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But see on similar social conditions for medical exemption
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"[76] It also follows from the wording of that provision that, first, the conditions under which the services are supplied in a hospital must be, not identical, but similar to those under which the services are supplied in an establishment governed by public law and, secondly, those conditions must be of a social nature." (I GmbH C-228/20)
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- Need not amount to any particular proportion of activities as long as part of objects
"[109] Moreover, as Mr Lasok pointed out, it is not necessary for the OU to demonstrate that all or a majority or indeed any particular proportion of the educational and training services provided by the BBC in the relevant period satisfied the particular prerequisites. It is sufficient that the supply of such services were part of its objects both as a matter of legal vires and economic and operational reality." (HMRC v. Open University [2016] EWCA Civ 114, Etherton, Lewison, Ryder LJJ)
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Member state discretion​
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- For member states to lay down the conditions or procedures for defining the similar objects
"[31] In that regard, it must be pointed out that the Court has already held that, in so far as Article 132(1)(i) of Directive 2006/112 does not specify the conditions or procedures under which those similar objects may be recognised, it is, in principle, for the national law of each Member State to lay down the rules in accordance with which that recognition may be granted to such organisations. The Member States have a discretion in that respect..." (Happy Education C-612/20)
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"[37] In so far as point (i) of Article 132(1) of the VAT Directive does not specify the conditions or procedures for defining those similar objects, it is, in principle, for the national law of each Member State to lay down the rules in accordance with which that definition may be granted to such organisations. The Member States have a discretion in that respect (see, to that effect, Kingscrest Associates and Montecello, paragraphs 49 and 51; and Zimmermann, paragraph 26).
[38] Furthermore, it is for the national courts to examine whether the Member States, in imposing such conditions, have observed the limits of their discretion in applying the principles of European Union law, in particular the principle of equal treatment, which, in the field of VAT, takes the form of the principle of fiscal neutrality (see, to that effect, Kingscrest Associates and Montecello, paragraph 52; and L.u.P., paragraph 48)." (MDDP C-319/12)
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- Member States to observe general principles including fiscal neutrality
"[38] Furthermore, it is for the national courts to examine whether the Member States, in imposing such conditions, have observed the limits of their discretion in applying the principles of European Union law, in particular the principle of equal treatment, which, in the field of VAT, takes the form of the principle of fiscal neutrality (see, to that effect, Kingscrest Associates and Montecello, paragraph 52; and L.u.P., paragraph 48)." ​(MDDP C-319/12 and Happy Education C-612/20, §32)
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- Where court has concluded that objects are the same, would breach EU law not to grant exemption
"[123] In the present case, for the reasons I have given, during the relevant period the BBC had the same objects as public bodies specified in the first part of Article 13A(1)(i) and, if it had been a public body, the BBC would have satisfied all the requirements for exemption for educational and training supplies. Either the UK had defined the BBC as having "similar objects" within Article 1A(1)(i) or, if the United Kingdom had not, the BBC and the OU are entitled to rely directly on that Article because the failure of the UK was a failure to implement the Sixth VAT Directive. The object of the education and training exemption was intended to increase access to the services specified in Article 13A(1)(i) by avoiding the increased costs that would result if they were subject to VAT: the MDDP case at paragraph 26. To exclude the BBC from the exemption would both be contrary to the objective of the Sixth VAT Directive and contrary to the principle of fiscal neutrality." (HMRC v. Open University [2016] EWCA Civ 114, Etherton LJ)
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"I agree also with the Chancellor, for the reasons that he gives, that even if the BBC was not "defined by" the United Kingdom it was entitled to rely on the directly applicable effect of article 13A(1)(i). As the Chancellor has pointed out in the JP Morgan case the CJEU held that a member state's discretion to implement a directive was limited by (a) the purpose of the exemption (see [45]) (b) the principle of fiscal neutrality (see [46]) and (c) the elimination of distortion of competition, even if that distortion is not substantial (see [47]). In those circumstances if the United Kingdom, exercising its discretion, had refused to define the BBC as having "similar objects" to those specified in article 13A (1)(i) it would have exceeded its discretion. The JP Morgan case also shows that the existence of a discretion conferred upon a member state does not preclude a provision in a directive from being sufficiently precise as to be directly enforceable, at least where the member state could not legitimately have exercised its discretion so as to exclude the claimant from the exemption." (HMRC v. Open University [2016] EWCA Civ 114, Lewison LJ)
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Member state exceeding discretion​
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- National court to compare objects of private body with those of bodies governed by public law providing educational services
"[54] As was pointed out by the Advocate General in points 70 and 71 of her Opinion, it is for the national court to determine whether the exemption of services supplied by an organisation such as MDDP, in accordance with point (i) of Article 132(1) of the VAT Directive, exceeds the discretion granted to the Polish legislature. It is for that court to examine the object and conditions of MDDP’s activity by comparing them with those of Polish bodies governed by public law providing educational services. It follows from the Court’s answer to Question 1 that the mere fact that an organisation such as MDDP pursues commercial objects is not sufficient to preclude its having objects similar to those of bodies governed by public law and that its services may therefore be exempted in accordance with that provision.
[55] If the national court were to find that the objects pursued by an organisation such as MDDP cannot be considered to be similar to those pursued by a body governed by public law, MDDP could rely on the fact that national law exempts, in infringement of point (i) of Article 132(1) of the VAT Directive, its professional educational and training services from VAT. In that case, its services would be subject to VAT and MDDP could then claim, to that extent, a right to deduct input VAT in accordance with Polish legislation." (MDDP C-319/12)
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Examples​
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- Permissible to limit exemption to entities having a partnership with an educational establishment, subject to equal treatment and fiscal neutrality
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"[33] In the present case, it is apparent from the information provided by the referring court that, in respect of private entities such as Happy Education which offer educational activities of the kind provided under the ‘School after school’ programme, recognition as an organisation with similar objects to those of an educational body governed by public law, for the purposes of Article 132(1)(i) of Directive 2006/112, is granted under Romanian law primarily through the conclusion of a partnership with an educational establishment under the ‘School after school’ programme, in accordance with Article 58 of the Law on national education and the Methodology for organising the ‘School after school’ programme.
[34] It is apparent from the information submitted by the referring court that Happy Education has not concluded such a partnership and, therefore, does not have the recognition or authorisation required for that purpose under Romanian law.
[35] Consequently, it must be held that, subject to the examination referred to in paragraph 32 above, such an entity cannot be regarded as an organisation recognised as having similar objects to those of an educational body governed by public law, for the purposes of Article 132(1)(i) of Directive 2006/112, since it does not satisfy the conditions laid down for that purpose by the national authorities. That characterisation is not affected by the fact that the entity in question carries out educational activities in the public interest of the kind provided under the ‘School after school’ programme, or that that entity has obtained authorisation in the form of the attribution of the CAEN code 8559 – ‘Other education n.e.c.’, during the process of registering with the National Trade Register Office." (Happy Education C-612/20)
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- National trade classification does not amount to recognition
"[35]...That characterisation is not affected by the fact that the entity in question carries out educational activities in the public interest of the kind provided under the ‘School after school’ programme, or that that entity has obtained authorisation in the form of the attribution of the CAEN code 8559 – ‘Other education n.e.c.’, during the process of registering with the National Trade Register Office.
[36] As regards, more specifically, that authorisation, it is apparent from the information submitted by the referring court that it is merely intended to serve as recognition, for the purposes of registration in the National Trade Register, that the company’s activity falls within the CAEN code 8559 – ‘Other education n.e.c.’, and thus relates solely to the legitimate commercial purpose of the activities carried out by that company. Therefore, as the Romanian Government and the European Commission have maintained, such an authorisation cannot amount to recognition of a company as an organisation having similar objects to those of an educational body governed by public law." (Happy Education C-612/20)
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