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HM Revenue and Customs Brief 18/14 - VAT exemption for education

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Issued 22 April 2014

VAT: outcome of review to consider extending the VAT exemption for education to for-profit providers of Higher and Further education

1. Purpose of this brief

To announce the outcome of the review to consider extending the VAT exemption to for-profit providers of Higher Education (HE) and Further Education (FE).

2. Who should read this brief

All providers of HE and FE whether they are for-profit, publicly funded or not-for-profit.

3. Background

In September 2012, the Government issued a consultation entitled 'VAT: Consideration of the case to extend the education exemption to for-profit providers of Higher Education' which invited comments on options that would enable for-profit providers of HE to exempt their supplies of HE where they exclusively provide this type of education. This followed an announcement at Budget 2012.

The number of responses was low, especially from for-profit providers, or potential providers, of HE. Overall, there was no overwhelming support for either of the options put forward. It was clear from the responses that businesses would prefer a solution that exempted both HE and FE training from VAT, and that there should, if at all possible, be a uniform basis of recognition of a commercial body as an eligible body, for both HE and FE.

In 2013, HM Revenue & Customs and the Department for Business, Innovation & Skills looked at alternative options and held a consultative workshop with interested parties.

4. Outcome

No solution was found that was acceptable to the majority of the for-profit education sector, and which also met Government objectives. The Government has therefore decided not to make any changes at the present time.

Some businesses would clearly benefit from an extension to the exemption, but on balance, the reasons not to extend the VAT exemption for education to for-profit providers weighed more heavily. These included:

  • a lack of evidence that the change would bring more providers into the market, or increase price competition within the sector
  • the impact on commercial providers who would need to exempt their education supplies and not be able to recover input tax, and also the impact on businesses purchasing training who would no longer be able to recover the VAT charged on training, and would likely be faced with higher costs
  • recognition that a few commercial HE providers have achieved university status, and therefore benefit from the VAT exemption
  • extending the exemption would be to create a number of winners and losers, and may not create an entirely level playing field
  • the cost to the Exchequer of extending the exemption

The Government recognises that this news will be disappointing to some providers in the sector although others will be pleased to maintain the status quo.

5. Who can I contact for further information?

For further information please contact the VAT Helpline on telephone: 0300 200 3700.

The Helpline is available from 8.00 am to 6.00 pm, Monday to Friday.

If you have hearing difficulties, please ring the Textphone service on telephone: 0300 200 3719.


About the Author

Crown Copyright 2014.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs.



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Article Published/Sorted/Amended on Scopulus 2014-04-25 10:14:32 in Tax Articles

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