HM Revenue & Customs v The Principal & Fellows of Newnham College in the University of Cambridge

HL [2008] STC 1225; [2008] UKHL 23; [2008] 2 All ER 863

The case concerns the occupation of land for VAT purposes. Newnham College made arrangements that allowed them to recover the VAT incurred on the construction of a new Library.

Generally, the occupation and use of a library by a college supplied to students is treated as an exempt activity. Newnham College made arrangements with its subsidiary company, leasing the library, selling the assets of the library and seconding staff to work in the library to this subsidiary. This created a taxable supply by the college to the subsidiary and allowed the recovery of the input tax charged on the construction of the library.

The focal point of the case was whether or not the college was in occupation and was using the library, hence determining the correct VAT treatment. For occupation to occur possession is required together with a level of control. This was demonstrated by the subsidiary company, the college only obtained the right to use the library.

The importance of this decision is that it provides guidance about the meaning of ‘occupation and use’ in the context of land.