Commissioners for Her Majesty's Revenue and Customs v The Chancellor, Masters and Scholars of the University of Cambridge.
Date: 2019-07-03
17


As a preliminary point, it must be noted, first, that the VAT Directive, which entered into force on 1 January 2007, repealed the Sixth Directive without making material changes to the earlier directive. Since the relevant provisions of the VAT Directive have essentially the same scope as that of the relevant provisions of the Sixth Directive, the Court’s case-law on the latter directive is also applicable to the VAT Directive.
20


It should be observed, in the first place, that, although the VAT Directive gives a very wide scope to VAT, only activities of an economic nature are covered by that tax. It is apparent from Article 2 of that directive, which defines the scope of VAT, that only the supply of goods and services for consideration are subject to that tax (see, to that effect, judgment of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraph 19 and the case-law cited).
21


With regard to the latter condition, it is clear from the Court’s case-law that the possibility of classifying a supply of goods or services as a transaction for consideration presupposes the existence of a transaction between the parties in which a price or consideration is stipulated and that that supply of goods or services is effected ‘for consideration’ within the meaning of Article 2 of the VAT Directive only if there is a direct link between the goods or service provided and the consideration received (see, to that effect, judgment of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraph 23 and the case-law cited).
22


In the second place, the deduction system established by the VAT Directive is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT thus ensures the absolute neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject, in principle, to VAT (judgment of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraph 25 and the case-law cited).
23


However, under Article 168 of the VAT Directive, in order to have a right of deduction, it is necessary, first, that the person concerned be a ‘taxable person’, within the meaning of that directive, and, second, that the goods or services relied on to confer entitlement to that right be used by the taxable person for the purposes of his taxed output transactions, and that, as inputs, those goods or services be supplied by another taxable person (judgment of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraph 26 and the case-law cited).
24


Thus, transactions that do not fall within the scope of the VAT Directive or that are exempt similarly do not, in principle, give rise to a right to deduct (see, to that effect, judgment of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments, C‑132/16, EU:C:2017:683, paragraph 30 and the case-law cited).
25


In accordance with settled case-law, in order for a taxable person to have a right to deduct input VAT, there must be a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to the right to deduct. The right to deduct VAT charged on the acquisition of an input asset or service presupposes that the expenditure incurred in acquiring that asset or service was a component of the cost of the output transactions that gave rise to the right to deduct (judgment of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments, C‑132/16, EU:C:2017:683, paragraph 28 and the case-law cited).
26


However, a taxable person also has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct, where the costs of the goods or services in question are part of his general costs and are, as such, components of the price of the goods or services which he supplies, as such costs do have a direct and immediate link with the taxable person’s economic activity as a whole (judgment of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments, C‑132/16, EU:C:2017:683, paragraph 29 and the case-law cited).
27


It follows from the above that, in either case, whether there is such a direct and immediate link will depend on whether the cost of the input goods or services is incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his economic activities (judgment of 30 May 2013, X, C‑651/11, EU:C:2013:346, paragraph 55 and the case-law cited).
29


In this respect, it must be found that, in raising and collecting donations and endowments, the University of Cambridge is not acting as a taxable person. In order to be considered to be a taxable person, a person must carry out economic activities, that is to say activities for consideration. As the donations and endowments — which are essentially made for subjective reasons on charitable grounds and on a random basis — are not consideration for any economic activity, the raising and collection of them do not fall within the scope of the VAT Directive (see, to that effect, judgment of 3 March 1994, Tolsma, C‑16/93, EU:C:1994:80, paragraphs 17 to 19). As is apparent from paragraph 24 above, it follows that the input VAT paid in respect of any costs incurred in connection with the collection of donations and endowments is not deductible, regardless of the reason why those donations and endowments were received.
31


It is true that the fact that costs are incurred in the acquisition of a service in the context of a non-economic activity does not, in itself, preclude those costs giving rise to a right to deduct in the context of the taxable person’s economic activity, if they are incorporated into the price of particular output transactions or into the price of goods and services provided by the taxable person in the context of that economic activity (see, to that effect, judgment of 26 May 2005, Kretztechnik, C‑465/03, EU:C:2005:320, paragraph 36).