© Crown copyright 2018
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: firstname.lastname@example.org.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/revenue-and-customs-brief-2-2018-vat-treatment-of-advanced-learner-loans/revenue-and-customs-brief-2-2018-vat-treatment-of-advanced-learner-loans
1. The purpose of this brief
This brief explains HMRC’s view on the tax treatment of receipts of payments of Advanced Learner Loans from Student Finance England by educational bodies.
Student Finance England is part of the Student Loan Company and acts as agent for the Department for Education.
This brief doesn’t apply to those educational bodies that are eligible bodies (see Section 3).
HMRC is aware that policy isn’t being applied consistently, so this brief confirms the policy to be applied in these particular circumstances.
Group 6 of Schedule 9 to the VAT Act 1994 exempts supplies of all education, and closely related goods or services, made by an eligible body. Eligible bodies include schools, universities, further education colleges and non-profit-making bodies that ring-fence any surpluses to supplies of education.
The bodies which can exempt all their supplies of education are set out in paragraph 4.1 of VAT Notice 701/30: education and vocational training.
Other bodies may exempt certain supplies of education, vocational training and closely related goods and services where the supplies “are ultimately a charge to funds provided by the Secretary of State” for Education.
These schemes are explained in detail in Section 13 of VAT Notice 701/30: education and vocational training.
3. The correct tax treatment of Advanced Learner Loans
The Advanced Learner Loans are provided under a contract between the student and the Secretary of State for Education, and are administered by Student Finance England. The loan is repayable by the student in accordance with the regulations in force at the time repayment falls due.
The Advanced Learner Loan is not a grant nor is it funding provided to the course provider for VAT purposes. It’s subject to an interest charge payable by the student on the repayments over time. HMRC views this as a loan which is ultimately funded by the student and not by the Secretary of State.
Consequently, receipt of the Advanced Learner Loan by the education provider doesn’t result in the course qualifying for exempt treatment under Items 5 to 5C of Group 6 of the VAT Act 1994. VAT is due at the standard rate on the educational provider’s full charge for the education it provides to the student.
The only exception is where the provider meets the criteria for being an eligible body for the purposes of the education exemption (paragraph 4.1 of VAT Notice 701/30: education and vocational training). These bodies can exempt all of their supplies of education and closely related services regardless of how they’re funded.
4. Operative date
The policy outlined in this brief is operative with immediate effect as it’s a clarification of HMRC’s existing policy.
HMRC will write to any business that has received an incorrect ruling or guidance and will issue a revised ruling, from a current or future date, depending on the individual circumstances of the education provider concerned.
If businesses have adopted an incorrect treatment on the advice of HMRC, they should write to us quoting Revenue and Customs Brief 2 (2018) by 31 March 2018 at the latest, providing evidence if there are individual circumstances to be taken into account.
Businesses that don’t do this will be expected to apply the correct treatment from the date of this brief.
5. Further information
Contact the VAT Helpdesk to get more information.
An amendment is being made to the VAT manual on education.
Issued on 24 January 2018.