Revenue and Customs Brief 18 (2014): outcome of review to consider extending VAT exemption for education
Published 22 April 2014
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Purpose of this brief
To announce the outcome of the review to consider extending the VAT exemption to for-profit providers of higher education and further education.
Who should read this brief
All providers of higher education and further education whether they are for-profit, publicly funded or not-for-profit.
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 higher education to exempt their supplies of higher education 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 higher education. 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 higher education and further education 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 higher education and further education.
In 2013, HM Revenue and Customs and the Department for Business, Innovation and Skills looked at alternative options and held a consultative workshop with interested parties.
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 higher education 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.
Who can I contact for further information?
For further information please contact the VAT helpline on Telephone: 0300 200 3700.
The helpline is available Monday to Friday, 8am to 6pm.
If you have hearing difficulties, please ring the Textphone service on Telephone: 0300 200 3719.
Issued 22 April 2014