SAE Education Ltd v Commissioners for HMRC [2019] UKSC 14

SAE Education Ltd v Commissioners for HMRC [2019] UKSC 14



hello and welcome to another edition of the UK law weekly podcast with me your host Marcus cleaver this week we're going to be looking in a case of SAE Education limited and commissioners for HMRC and the citation for this case is 2019 UK SC 14 the case that we are looking at today may prove interesting for those listeners who are currently at university and studying law as we will have a chance to think about the ways that universities operate in the context of this case though we are focusing on Middlesex University and the relationship that it has with a company called SAE Education Limited who are the appellant in this case chances are you won't have heard of SAE which more commonly goes by the name of the SAE Institute but simply put they offer higher education courses in creative media so things like animation films gaming etc in order to have these programs validated the SAE Institute partners with Middlesex University but the extent to which this is true was questioned by the taxman the issue is that if you supply education to students in the UK then you are exempt from value-added tax or v80 SAE obviously felt that they were within this exception and submitted their tax return accordingly HMRC disagreed on the basis that the Institute is not a college of a university within the meaning of schedule 9 of the value-added tax act in 1994 what it means for any such company to be a college of a university is therefore at the heart of this case and requires a close examination of the relationship on the one hand there has never been any substantive financial relationship between SAE and Middlesex because SAE is a subsidiary of a larger Australian company called Navitus and therefore preserves a greater degree of independence in that sense on the other hand Middlesex and SAE do workplace lis together in an academic context and that is subject to a number of agreements that relate to things like the validation of courses Quality Assurance and accreditation once the case had passed through the lower courts it arrived at the Supreme Court which is where we pick it up Lord Kitchen gave the lead judgment and began by noting the influence of EU law in this area in particular the UK legislation derived from the v80 directive which has the overarching aim of reducing the costs associated with higher education by not making them subject to v80 with that in mind the main definition is those bodies which are governed by public law and also aim to provide university education in the UK clearly that would cover Middlesex but what about the position of SAE well member states are obliged to make similar provisions for other bodies that are concerned with higher education and are generally governed by public law as this furthers the overall aim of lowering the costs of higher education the way that this is achieved in the UK is by creating an exemption for colleges of universities which we did mention earlier but this doesn't take us any further because we need to know precisely what it means to be a college or even a university we are not helped by the v80 act itself as this does not define these terms but it is perhaps not too surprising to hear that there is a statutory definition of universities or at the very least higher education institutions within the higher education and research act 2017 a middle section university is even mentioned by name in certain pieces of secondary legislation such as the higher education basic amount in higher amount England amendment regulations 2018 unfortunately when it comes to colleges we are in a bit more of a difficult position because such useful and easily accessible definitions do not exist this means that it is up to the courts to derive their own definition and so as part of his judgement Lord Kitchen came up with a few criteria that we will go through it now the first two are fairly obvious because they are identical to the statutory criteria already used for universities ie a college must be governed by public law and also be involved in the provision of higher education that makes a lot of sense because if a university already does this then it is surely incumbent on a college of any given university to also do the same thing beyond that the only other part of the definition that we actually need is an understanding of what it means for a college to be of a university does it have to operate on university grounds does it have to be incorporated within the overarching structure of the university does there have to be a financial relationship that exists between college and the university for the justices the answer did not lie in the formalized structure that the relationship was given because this rarely tells us the whole story and would have the effect of pretty much excluding companies from the private sector altogether if the directive seeks to equalize the tax deduction across all of higher education then such a restrictive definition would frustrate that aim of course that constitutional inclusion would itself be almost entirely persuasive but it is not the be-all and end-all instead courts must also look beyond this to the education is actually being provided as well as the relationship that doesn't exist between the college and the university however it is not really enough to talk in broad terms about the existence of a relationship without also thinking about what factors contribute to that relationship for lured kitchen this means asking a number of further probing questions such as firstly is there a shared understanding between the parties that the college is actually of the university secondly can the purported College actually enroll students to the university are they treated as part of the university during the course of their studies and can those students then subsequently graduate from the University as well thirdly are the courses on offer approved by the university and finally when students submits a piece of coursework or sits an exam is it understood that they are doing so in pursuance of a degree from the university it is important to say that these questions themselves are not determinative and furthermore they do not all have to be answered in the affirmative but rather they offer a guide to a much broader investigation into the relationship by the relevant court so talking of investigations we now need a final answer to whether SAE counts as a college of a university for the purposes of v80 and given our discussion of the judgment you may by this point already have some of your own ideas for the Supreme Court there was enough of a connection between Middlesex and SAE for the latter to escape paying v80 there was clearly a relationship between the two institutions and SAE provides higher education to students within limits of public law on the surface then this seems like a decision is relatively straightforward and uncontroversial but is speaks to a topic that is the subject of hot debate around higher education we can see that there exists a relationship between Middlesex and SAE but that tells us nothing about the quality of that relationship or indeed whether it should exist in the first place as I hinted that at the start of this episode a lot of my listeners and followers are law students but while a lot will go to what we might call traditional universities there will also be some who go to a for-profit universities such as BPP or university of law in fact when it comes to for-profit education law and business of the most popular subjects and the SAE Institute that we examined in this case is more of an exception by providing education in the field of media and web design etc but how do these students know that they are getting a quality education or even value for money for organizations such as the University and colleges Union the pursuit of profit precludes the chance of a quality education and corners will be cut along the way the logical conclusion is that you end up with providers such as Trump University in America where in the so called degrees and not even worth the paper that they are written on the thing is though we now have had private organizations involved in higher education in the UK for quite a while now and any negative press coverage has tended to be rare and overblown I can't speak people's own experiences but bpp has previously been named as professional slash higher education provider of the year while the University of Law regularly has student satisfaction scores in the 90s how does this marry up with the accusation that privatization causes standards to slip well for a start these places are not operating completely out on their own with no checks whatsoever on their output we saw in the context of this case how SAE are subject to cross-validation and they also comply with the requirements of the body called the Quality Assurance agency who operate is basically an Ofsted for higher education by going to universities carrying out reviews and producing reports based on the evidence beyond that there is also the obvious fact that these institutions are operating in competition with not only each other but also the traditional universities as well if they were bad and got poor reviews in the press online or in the National Student Survey than any prospective student who does their research would not spend thousands of pounds on such an education that it's not exactly the optimal way to run a business model and so while cutting corners might work in the short term these organizations know that it would not hold up over an extended period of time this invisible hand of the market also plays a role when it comes to pricing as well we all know that the government still plays a role when it comes to tuition fees so flexibility in this area is a bit more limited but nevertheless private institutions are very competitive on price and can offer various incentives for more intensive courses or where the courses online only all of this might be starting to sound a little bit like an advertisement for those for-profit universities I am keen to point out that it is not and I myself have no conflict of interest in this regard private institutions have been around for a little while now but compared to the traditional red bricks they are still in their infancy and so it is healthy to have a degree of skepticism when the House of Lords raise questions about the brains being loosened too much that is exactly the correct thing to be scrutinizing the overall point though is that competition is healthy and traditional universities are scared because they have operated within their own bubble for too long with minimal scrutiny on their own performance now they are having to innovate and improve in order to stay relevant and not lose students to private institutions the ones that do say will thrive and it will be the students who benefit and those that do not will wither away and that itself is no bad thing at all well thank you very much for tuning in to this episode and thanks as ever to bensound.com apology from me because I'm sort of losing my voice and you don't need to know this but I've got a bit of a mouth ulcer so if some of the letter is sound weird and my voice is a bit weird then hopefully it'll be all back to normal next week and at which point I will have a new case for you so I look forward to bringing you that then in the meantime make sure to visit the website at UK law weekly com sign up at the mailing lists and all the Twitter Facebook YouTube stuff as well thanks very much for listening to speech next week

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