08 February 2022
Julie Lalou ran training courses that taught her clients how to groom dogs, including Level 2 and Level 3 City and Guilds Dog Grooming Assistant courses. Having charged VAT on these for many years, she formed the opinion that her dog-grooming courses were in fact private tuition that qualified for VAT exemption, as supplies of education. She applied to cancel her VAT registration and submitted a claim to recover £102,000 in VAT which she believed she had previously overpaid to HMRC on her income from these courses.
HMRC refused these applications, taking the view that Ms Lalou’s courses were not exempt because dog-grooming training is not a subject that is ordinarily taught in schools, colleges and universities - one of the conditions for private tuition to be exempt from VAT.
Ms Lalou appealed to the First-tier Tax Tribunal, presenting evidence that out of the 293 further education colleges in England she had surveyed, 88 offered a course with a dog-grooming element, of which 57 were dog-grooming courses in their own right. In her opinion, this demonstrated that dog-grooming was a subject ordinarily taught in schools and universities. However, the tribunal has decided the case in favour of HMRC, that the courses were not eligible for the private tuition exemption. While it accepted that her courses led to recognised qualifications, so were educational and not recreational, the tribunal found that Ms Lalou had failed to provide enough evidence to meet the ‘ordinarily taught’ test.
The education exemption is based on EU VAT legislation and the tribunal has interpreted related case law from the Court of Justice of the European Union (CJEU) to mean that private tutors must demonstrate that their subject is taught at a wide number of schools or universities across both the UK and EU member states. Ms Lalou’s research was focused on colleges in England and while the tribunal said it would not have expected her to conduct exhaustive searches of every school and university in every country in the EU, it considered that some evidence of the position in other parts of the UK and in EU member states was necessary to support her claim for exemption.
Ms Lalou’s appeal relates to VAT periods before the UK left the EU’s VAT system but, unless the government changes our national law on this topic, the UK courts will still be bound by pre-2021 CJEU precedents, even when considering more recent appeals. In this case, it has resulted in a UK private tutor being asked to prove that her subject is commonly taught, not just in the UK but throughout the EU as well. It would surely now make sense for HMRC to bring in new rules to limit the geographical scope of this test to cover only UK schools, colleges and universities.
The case also highlights how unfair it can be to require a sole trader running a small business at a local level to run such extensive research on the extent to which their subject is taught in schools and universities – especially as there is little HMRC guidance available to private tutors on what evidence it expects to support exemption from VAT. HMRC can also be reluctant to accept that the range of subjects ‘ordinarily taught in schools and universities’ can evolve over time, or that non-traditional subjects can become exempt from VAT. However, the current rapid increase in both dog ownership, and their owners’ desire to see them looking their best, may mean that it is only a matter of time before dog-grooming courses go mainstream in vocational colleges everywhere and HMRC is forced to grant exemption to private providers of this tuition.