A sixth form college will receive a £55,000 tax rebate after a tribunal ruled that meals served at its in-house restaurant run by catering students should be exempt from VAT.

MJ’s restaurant at Brockenhurst College in Hampshire is open to the public between Monday to Friday and charges heavily discounted prices, with a three course meal costing as little as £15.

The popular restaurant does not make a profit and has been described by the college as “tantamount to a classroom”, run for the benefit of the students.

But Brockenhurst has had to fight a long battle with Her Majesty’s Revenue and Customs (HMRC), which argued diners benefited from the service and VAT was chargeable.

However, at a tribunal last week a judge ruled that the restaurant aimed to meet the educational needs of the students and was therefore VAT-exempt.

The college has now reclaimed almost four years of VAT it wrongly paid on the meals served.

Principal Di Roberts said the rebate would be used to enhance the college’s catering and hospitality courses.

The news comes just weeks after ministers decided not to exempt sixth form colleges from paying VAT.

Unlike schools and academies, sixth form colleges are not reimbursed by the government for VAT on the purchases they make, which costs the sector some £30 million a year.

Skills minister Matthew Hancock argued doing so would lead to demands from further education colleges, costing £150m a year.

James Kewin, deputy chief executive of the Sixth Form Colleges’ Association, told TES it was good that “common sense” had prevailed in the case of Brockenhurst college.

“However, the Department for Education’s recent decision not to compensate sixth form and FE colleges for their VAT costs means that funding will continue to be redirected away from the front line education of students to pay the taxman, in a way that it is not in schools and academies,” he said.

“We think the £30 million that HMRC takes from sixth form colleges each year would be better spent on improving the life chances of young people.”