Find out how the changes to funding for higher education providers in England will affect their VAT treatment from 1 August 2019.
Purpose of this information sheet
There are changes to the way in which higher education providers in England are funded with effect from 1 August 2019. The VAT changes are explained in Revenue and Customs Brief 11 (2018): VAT - rule changes for higher education. This information sheet explains the impact of the changes.
General description of the change
At Budget 2018, the government announced that, subject to Parliament approval, it will update the VAT law to make sure there is continuity of VAT treatment for English higher education providers under the Higher Education and Research Act 2017.
The change in legislation applies to English higher education providers who register with the Office for Students in the Approved (fee cap) category. English higher education providers seeking grant funding from the 2019 to 2020 academic year must apply for registration and be registered with the Office for Students in the ‘Approved (fee cap)’ category prescribed in regulations made under section 39 of Higher Education and Research Act 2017 in order to be eligible. These providers will be listed on the register of higher education providers, which will be maintained by the Office for Students.
Certain higher education institutions in England are currently designated by an order or statutory instrument as eligible to receive government grant funding. This designation will end on 31 July 2019. Institutions conducted by higher education corporations in England will no longer be eligible for funding from 1 August 2019. In both cases, these bodies will only be eligible for funding if they are in the ‘Approved (fee cap)’ category.
The exemption for higher education is for supplies made by eligible bodies under item 1, group 6, schedule 9, VAT Act 1994. Higher education providers in England will be treated as eligible bodies if they are either:
- UK universities or their colleges (currently note 1(b) to group 6)
- non-profit making and non-profit distributing bodies under note 1(e) to group 6
- registered in the ‘Approved (fee cap)’ category (prescribed in regulations made under section 39 of Higher Education and Research Act 2017) on the register maintained by the Office for Students
Providers who are affected
These changes affect the VAT treatment for English higher education providers.
There are no changes to the law affecting education in Scotland, Wales and Northern Ireland. Education is devolved to the individual administrations of the UK.
There are no changes to the VAT treatment of:
- bodies which provide only primary, secondary or further education
- tertiary colleges providing both secondary education and vocational training
- UK universities and their colleges which are eligible bodies under note 1(b) of group 6 of schedule 9 to the VAT Act 1994 - English universities are those bodies that are authorised by the Office for Students or by Royal Charters or by Act of Parliament to use the university title
There is no change to those bodies that are charities, or are covered by note 1(e) to group 6 of schedule 9 to the VAT Act 1994.
Government grant funding refers only to bodies that are eligible to receive a direct grant from the Office for Students under section 39 of Higher Education and Research Act 2017. It does not refer to loans that are repayable by students. The liability of supplies made by bodies funded in that way will depend on whether they are eligible bodies such as universities or ‘Approved (fee cap)’ providers.
‘Approved (fee cap)’ and ‘Approved’ status
The lists of ‘Approved (fee cap)’ providers and ‘Approved’ providers is published by the Office for Students.
Bodies with ‘Approved’ status will not automatically be eligible bodies. However, they may qualify as an eligible body under the VAT exemption if they are either:
- a university (if they have university title)
- a non-profit making body.
The same applies to bodies that have applied for but not yet received confirmation of ‘Approved (fee cap) status’.
These arrangements have been announced in advance so that providers can make the necessary arrangements to apply for the appropriate status and apply the correct VAT liability.
There are no transitional arrangements available for those higher educational providers who could exempt their supplies under the current arrangements as higher education corporations or as bodies eligible for public funding.
You should use the contents of this information sheet, and Revenue and Customs Brief 11 (2018) to help you in deciding whether you are eligible to exempt your supplies of education after 1 August 2019.
Education and vocational training (VAT Notice 701/30) will be amended once the relevant regulations made by the Secretary of State for Education have been approved by Parliament.
If you have any queries on VAT treatment, contact the VAT general enquiries helpline.
The Office of Students has guidance on how to register with ‘Approved (fee cap)’ or ‘Approved’ status.