Newnham College has won the right to avoid VAT on its £7.5m library following a House of Lords ruling.

The Lords rejected an appeal from HM Revenue & Customs on the case yesterday.

As an educational supplier, Newnham would have paid VAT on its suppliers' bills but not been able to reclaim VAT itself. So the 'famously poor women's college', as it is referred to in the judgment, opted to set up a company to build the library that could reclaim the VAT.

The taxman objected to the structure saying that it should be set aside for tax purposes, but the law lords disagreed, saying that it had not been proven that the college 'occupied' the library.

'There is nothing in the arrangements, whether in law or in practice, which contradicts or displaces the right of exclusive occupation granted to the company by the lease, ' Lord Hoffman said.

'The practical physical control of the library premises is in the hands of the librarian and her staff, who act on behalf of the company. It is they who have the right to admit or exclude persons from the library and they do not share this right with the college.

'The college is contractually entitled to have its members in good standing admitted and provided with books and other services, but these rights cannot be characterised as rights of occupation,' he said.

Only one of the five law lords dissented from that verdict.

Further Reading:

Read the Law Lords judgment