Charging and reclaiming VAT on goods and services related to private school fees
Check if VAT is due on payments linked to private school fees and find out what you can reclaim VAT on.
Overview
Since 1 January 2025, all education services and vocational training provided by private schools in the UK for a charge have been subject to VAT at the standard rate of 20%. This includes boarding services provided by private schools.
This guidance explains how some payments and situations relating to education are treated for VAT.
VAT is due on the total of everything that is received in return for providing education to the student. For example, this may include the amount paid by the parent, as well as any external bursary that may be paid for the education of that student.
You can find out general information:
VAT on goods, services and payments
Supplying education goods and services that include other elements (such as school meals and transport)
If you supply a number of goods and services together, it is important to know where VAT applies to either:
- the whole transaction
- each part of the supply individually
When you supply more than one good or service together as a package, this is normally seen as a single supply. In the same way, where a service is provided along with goods or services that are in addition to the main service, this is also normally seen as a single supply.
You should not artificially split the package to create separate supplies with different VAT liabilities. The single package will have a single VAT treatment.
If separate goods or services are supplied together and each represent a separate aim to the customer, these are seen as separate supplies. Each supply will have its own identity and may be subject to a different rate of VAT.
When you supply a package of education for a single fee, this is normally a single supply for VAT. This package could include a number of elements (such as transport or meals) alongside the main element of education. As a single supply, this has a single VAT liability.
If a school supplies education and also supplies other elements for a separate fee, these are normally separate supplies. For example, if a school offers school meals alongside the education for a separate charge, these are normally 2 different supplies. These may have different VAT liabilities. The education is subject to the standard rate of VAT and the school meals may be exempt if they meet the conditions for being closely related services.
Find out more in VATSC11113 of VAT Supply and Consideration— HMRC manuals.
Supplying special educational needs and disabilities (SEND) therapies and education
In certain settings, pupils may receive both education and therapy services while at school. Services usually qualify as healthcare for VAT purposes if they are supplied by registered healthcare professionals, such as:
- speech and language therapists
- educational psychologists
Qualifying supplies of healthcare are exempt from VAT as long as the primary purpose of these services is the protection, maintenance, or restoration of the health of a person.
If these services are supplied through your school, you must check:
- who is making the supply
- whether these services form part of a single supply of education or are a separate supply of healthcare
You should also read the ‘Supplying education and welfare services together’ section in this guidance.
The following examples show how differences in the way these services are delivered may lead to different VAT outcomes.
These examples are illustrative only and you will need to consider your school’s individual circumstances.
Example 1 — a school supplying education and therapy as a flat fee
School 1 charges a flat fee which includes all education and therapy. The pupils attend educational classes and therapy sessions (for example, speech and language therapy) throughout the school day depending on their specific needs.
The school fee is not affected by the amount or type of therapy they receive. In this case, it is likely that the school is making a single supply of education, with an element of healthcare.
The school fee would be standard rated as education, as this is the dominant element of the supply.
Example 2 — parents contracting and paying the therapists directly
School 2 charges a fee for education but does not employ therapists or include therapies as part of its fees. Parents contract and pay the therapists directly.
In this case, the school is not supplying the healthcare services. The therapists must determine if their supplies meet the conditions for the healthcare exemption and whether they need to register and account for VAT.
The school fee is standard rated as education.
Example 3 — a school supplying education and therapy as separate fees
School 3 directly employs therapy providers. Parents are charged a fee for education and may optionally pay a separate additional fee for therapy services.
In this case the therapy services are supplied by the school, but it is likely that they are a separate supply of healthcare.
The school fee for the supply of education is standard rated.
If the supplies of therapy services meet the conditions of the healthcare exemption, the school does not need to charge VAT on them.
You can find more information:
- on VAT Supply and Consideration — HMRC manuals
- about accounting for VAT on goods or services for health professionals and pharmaceutical products (VAT Notice 701/57)
Supplying education and welfare services together
If you supply education together with welfare services, it is important to determine if the supply is of welfare or education.
Some services being supplied may qualify for the welfare exemption as a supply of welfare rather than a supply of education.
The main element of the supply must be welfare.
An example of a supply of welfare is supervision and guidance provided to a vulnerable person to develop a capacity to live independently and complete everyday tasks. This may be listed in an education, health and care (EHC) plan.
Any welfare that is provided will be secondary to education if:
- a school is providing education to a pupil
- the parent considers that they are buying education
This is a single supply of education for VAT purposes.
An example of an exempt welfare service is day care services, such as those provided by a playgroup or after school club (but not activity-based clubs, such as dance classes). These services are related to the care and protection of children.
Find out more about VAT on supplies of welfare and the conditions of welfare supplies in Welfare services and goods (VAT Notice 701/2).
Some specialist special educational needs and disabilities (SEND) schools may provide provisions of care and education. Whether a supply is one of care or education will be determined by the main element of the supply. Where a SEND school is providing education for a fee this will be subject to VAT.
You can find out more about how local authorities can recover VAT in the ‘Local authority placements in private schools’ section of this guide.
Receiving grant payments for education services
Whether VAT applies to a grant payment depends on the exact nature of the grant arrangements.
Block grant funding that does not relate to individual pupils (for example, block grants from the Education and Skills Funding Agency) is normally outside the scope of VAT.
However, if you receive a grant to cover a specific pupil’s fees, the whole fee is subject to VAT. This is because there is a direct link between the:
- service you are supplying
- payment you have received
For each payment you receive you’ll need to decide if:
- there is a ‘consideration for a supply’
- it is liable to VAT
Find out more about supply and consideration and grants in VATSC06310 of VAT Supply and Consideration — HMRC manuals.
VAT treatment of bursary payments for school fees
VAT applies to the total value that is received in return for the education the school provides to the student. The school must account for VAT on the total amount of the fee charged for the education, even if this is made up by both:
- the parent’s payment
- a separate bursary
For example, VAT is chargeable on 100% of a fee if:
- a school receives a bursary payment for a specific child that accounts for 30% of the total chargeable fee
- the parent of the child pays the remaining 70% of the fee
When a school provides a bursary payment to itself, the payment is outside the scope of VAT.
Local authority placements in private schools
VAT will be due on fees, if:
- a private school is named in the education, health and care plan of a student
- the local authority funds the place of the student
This means that local authorities need to pay VAT on the supply of education to the student.
Local authorities can reclaim VAT incurred using the existing ‘section 33’ processes.
Find out more information about section 33 in Local authorities and similar bodies (VAT Notice 749).
VAT invoices
If you invoice for goods and services that are subject to different rates of VAT, you can include them on the same invoice.
The invoice must show the rate of VAT that has been applied to each supply.
Find out more in section 4 of Record keeping (VAT Notice 700/21).
Application and registration fees paid during the application process
Application registration fees that must be paid for a student to attend your school are subject to VAT, the same as normal school fees.
Other forms of payment
Consideration is a payment in return for the supply of a good or service. For example, you paid a cash payment in return for a textbook. The consideration is the cash payment and the good is the book.
A payment is usually made in money, but it does not need to be. Consideration can be paid in goods or services supplied in return (for example, a barter agreement), or a combination of both.
Find out more about VAT considerations in VATSC05000 of VAT Supply and Consideration — HMRC manuals.
Activities of charities that run private schools
If a charity carries out a number of activities, including running a school, each activity must be considered separately to decide if it is a business activity and subject to VAT.
If an activity involves making supplies with a view to generate income, this is considered a business activity and is subject to VAT.
Supplies provided for the classroom
Goods or services supplied may be exempt if they’re necessary to the delivery of education and are for direct use by either the:
- pupil
- student
- trainee
To benefit from the exemption, the goods or services must be supplied separately from the main education. See the ‘Supplying education services that include other elements (such as school meals and transport)’ section of this guidance for more information.
For example, if you sell stationery to a pupil to use in class, this is closely related to the supply of education and is exempt from VAT.
All other goods and services that are not closely related to the supply of the education are subject to VAT.
Nursery classes provided by private schools
Nursery classes that are wholly, or almost wholly, made up of children below compulsory school age remain exempt from VAT. For example, where 90% of the children in a class are below compulsory school age, the class will be exempt from VAT.
Extra-curricular and before and after school clubs
Extra-curricular activities which are educational in nature provided by a private school are subject to VAT.
However, any before or after school childcare, or childcare-based holiday clubs, provided by a private school that consist of care are exempt from VAT.
VAT implications for fee-paying sixth forms and further education providers
You are affected by the changes to VAT if all of the following apply:
- your main purpose is to provide education that is wholly or mainly suitable for 16 to 19 year olds
- you provide full-time education to 16 to 19 year old pupils
- the majority of those pupils are charged a fee
’Wholly or mainly’ means at least 51% of the education you provide is suitable for 16 to 19 year olds.
How you are affected depends on:
- the nature of the education you provide
- your typical target audience
For example, a sixth form college that mainly provides A level tuition is regarded as providing education suitable for 16 to 19 year olds. The college is subject to VAT if it is providing full time education to 16 to 19 year olds, and the majority of them are charged a fee.
Education that is normally targeted at students over 19 years old (for example, undergraduate and postgraduate education) is not affected.
Independent training providers
Independent training providers providing education to 16 to 19 year olds for a fee are not subject to VAT if the funding is provided under a contract with a relevant contracting authority.
The relevant contracting authorities are:
- The Secretary of State
- Medr (Commission for Tertiary Education and Research)
- The Department for the Economy in Northern Ireland
- Skills Development Scotland
Non-maintained special schools
Block grant funding provided to non-maintained special schools is usually outside the scope of VAT. Find out more in the ‘Receiving grant payments for education services’ section of this guide.
A non-maintained special school is required to charge VAT if it receives funding on a per-pupil basis from a local authority when they are named in the EHC plan for the pupil. The local authority can reclaim this VAT.
Non-maintained schools charging fees to pupils for education that do not receive block grant funding are subject to VAT.
Teaching English as a foreign language
Courses provided by private schools that teach English as a foreign language are exempt from VAT.
Higher education courses
Higher education courses provided by private schools are exempt from VAT. Higher education courses are defined:
- as higher education courses in England and Wales specified in section 83(1) of the Higher Education and Research Act 2017
- as courses in Scotland specified in section 5(3) of the Further and Higher Education (Scotland) Act 2005
- in Northern Ireland as courses of any description mentioned in paragraph 1 of schedule 1 to The Further Education (Northern Ireland) Order 1997
How to define board and lodging fees
The term ‘board and lodging’ is not defined in legislation.
Board and lodging relates to the arrangement where a pupil lives in school accommodation during term time.
Any board or lodging fees that are closely related to education or vocational training are subject to VAT.
Donations and voluntary contributions to private schools
A donation of money or a voluntary contribution is not chargeable to VAT if the:
- donor gives it of their own free will
- donor or their beneficiary does not receive anything in return
- donation is not subject to any terms or conditions
Find out more about VAT and donations in VATSC06110 of VAT Supply and Consideration — HMRC manuals.
Reclaiming VAT
Reclaiming VAT on supplies
You can reclaim VAT incurred on the goods and services used to make taxable supplies such as education and boarding.
VAT you incur on purchases that are used exclusively for non-business purposes cannot be reclaimed.
You cannot normally reclaim VAT on exempt supplies such as closely related goods and services supplied with education.
Private schools are likely to provide taxable and exempt supplies.
This makes them partially exempt businesses incurring VAT on taxable and exempt supplies.
To work out how much VAT you can reclaim, you need to perform an apportionment. This is known as a partial exemption calculation.
There are 2 ways for calculating and apportioning:
- the standard method
- a bespoke method (known as Partial Exemption Special method)
Find out more in Partial exemption (VAT Notice 706).
Incurring VAT on supplies before registering for VAT
In certain circumstances, businesses can reclaim VAT they have incurred on taxable supplies before they register for VAT.
VAT can be reclaimed for:
- goods received up to 4 years before registration that are still available for use when you register
- services you received up to 6 months before registration that are available to use for business activities you’re carrying out after registration
The incurred VAT may need to be apportioned over the economic life of the goods. This would normally be 5 years, but you should base the economic life period on the:
- taxable period of use
- exempt period of use
There are examples on how to calculate how much VAT can be recovered on goods acquired before registration in VIT32000 of VAT Input Tax — HMRC manuals.
Where you’ve used a service before registration to make exempt supplies, you can only recover a portion of the VAT relating to the taxable use after registration using a fair and reasonable method.
Example of using a service before registration
A private school takes out a subscription to an educational website for one year, running from 1 September 2024 to 31 August 2025.
As the subscription is used to provide education services, it would be projected to be used in making exempt supplies for 4 months, and for taxable supplies for 8 months.
The school can recover a portion of the VAT incurred based on the amount of taxable use. The portion is calculated as:
(12 – 4) ÷ 12 = 8 ÷ 12 × 100 (fully taxable use) = 66.67%
This is rounded to the nearest whole number. This means that the school can recover 67% of the VAT incurred before registration.
If it is projected to have a mixed use of the services, 70% taxable and 30% exempt, the percentage of recoverable VAT will be:
(12 – 4) ÷ 12 = 8 ÷ 12 × 70 (part taxable use) = 46.67%
This is rounded to the nearest whole number. This means that the school can recover 47% of the VAT incurred before registration.
Large capital items and reclaiming VAT
VAT incurred on large capital items is recovered differently to everyday expenditure.
To reflect the fact that the use of these assets can change over time, the Capital Goods Scheme allows for the VAT recovered to reflect this changing use.
For example, this could apply where capital assets have been acquired in recent years (when it could not be recovered when used for exempt education) and are now used for taxable education.
This scheme applies to:
- land, building and civil engineering works of a value of £250,000 or more
- items of computer equipment of a value of £50,000 or more
- aircraft, ships, boats or other vessels of a value of £50,000 or more
You may be entitled to reclaim VAT you have incurred on capital items that are less than 10 years old. Find out more in Capital Goods Scheme (VAT Notice 706/2).
Hiring or letting out facilities
The VAT treatment of the hiring or letting out of facilities has not changed.
Find out more about when and how to charge VAT when hiring or letting out facilities in section 3.4 and section 5 of Land and property (VAT Notice 742).
Buying travel and accommodation for resale to pupils
If a school ‘buys in’ travel services related to a school trip (for example, transport or accommodation) that are then resold to pupils they may be treated as a tour operator for VAT purposes.
In these cases, the school must use the Tour Operators Margin Scheme to account for VAT on the trips. Find out more about tour operators and the Tour Operators Margin Scheme in Tour Operators’ Margin Scheme (VAT Notice 709/5) and Travel agents (VAT Notice 709/6).
Get more information
You can watch webinars about VAT on private school fees, to learn about:
- if and when you need to register for VAT as an education provider
- the goods and services you need to charge VAT on and reclaim VAT for
- charging and reclaiming VAT
You can also find out more:
- about sending a VAT Return
- on how to pay your VAT bill
- about VAT repayments
Updates to this page
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The example of parents contracting and paying the therapists directly and the example of a school supplying education and therapy as separate fees have been updated to add clarity. Information on VAT implications for fee-paying sixth forms and further education providers has been updated.
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The 'Incurring VAT on supplies before registering for VAT' section has been updated with an example of using a service before registration.
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Information about education services and vocational training provided by private schools being subject to VAT at the standard rate of 20% has been updated.
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Guidance has been added about supplying special educational needs and disabilities (SEND) therapies and education.
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Added translation
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Guidance has been added about extra-curricular and before and after school clubs, independent training providers, non-maintained special schools, higher education courses and teaching English as a foreign language.
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Details on how to attend webinars about VAT on private school fees have been added to the ‘Get more information’ section.
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Added translation