HMRC internal manual

VAT Education Manual

Is a business making supplies for consideration?: education as a business or non-business activity

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

An activity has to be either business or non-business.


Education funded by charging fees is a business activity. If there is both grant income and business income (fees) supporting the activity then the activity is a business one. An activity has to be either business or non-business.

It is irrelevant who actually pays these charges - the student or, for example, an employer or local authority - or whether they are insufficient to meet the full costs of providing the education.


In general, the grant funding by government of schools in the ‘state sector’ and of sixth form colleges is not consideration for any supply by the school or college to the Government. It is therefore outside the scope of the tax and the provision of free education to pupils is a non-business activity. This is different from the situation where a government body pays the fees for education provided to an individual student. Such payments are often a third party consideration for supplies of education. Those supplies are in the course of business and the appropriate VAT liability must be applied to fees.

If there is no business income, for example where the education is totally funded by outside the scope grant income, the activity is non-business.