The decision by the VAT and Duties Tribunal allows the college to recover pound;383,669.08 in value added tax paid on goods purchased for business use during construction, such as the kitchens and beauty salon.
The Commissioners of Customs and Excise had decided that, since the college's business income is split between taxable and exempt supplies in a ratio of 10 per cent to 90 per cent, the amount of VAT recoverable should be restricted to 10 per cent.
But the tribunal ruled that this assessment was "both unfair and unreasonable" since no real distinction could be made between private use and use by an exempt supplier.
The college was therefore entitled to recover 100 per cent of the VAT involved.
Telford had also appealed to the tribunal on the grounds that, as a public body, it is not a taxable person. But the tribunal rejected this, ruling that, in supplying courses to students, the college operates under a "private law regime".