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HMRC internal manual

VAT Education Manual

Group 6 Item 1 Education, research and vocational training provided by eligible bodies: university subsidiary training companies

In some cases where a university trading company provides education, it may be acting as a ‘college, institution, school or hall of a university (see VATEDU39370). As a consequence it is an ‘eligible body’ for the purposes of Note 1(b) to Group 6 of Schedule 9 of the VAT Act 1994. This means that any education or training provided by the university subsidiary trading company is an exempt supply of education.

Background

A review on the treatment of supplies by companies that are owned or controlled by universities was undertaken in 2010. This resulted in a change in policy that was made with effect from 11 March 2010.

Effect

This treatment is limited to those companies that:

  • are owned/controlled by a university;
  • provide university level education leading to a qualification awarded by a university or a nationally recognised body; and

have close academic links with their parent university; for example, where students on the company’s courses are registered/enrolled with the parent university, subject to its rules and regulations and awarded qualifications by it.

There are three key themes that should be present before a company can be treated as an eligible body within Note (1)(b).

  • There must be a close relationship between the university and the company. In the case of a university owned/controlled company this is always likely to be present.
  • The company must provide university level education leading to a qualification awarded by the parent university or a nationally recognised body. This would include so called ‘closed’ university level courses that are intended to lead to a qualification; that is the fact that access to the courses may be restricted, priced ‘commercially’ or run at a profit is not determinative of their status in this context.
  • If students on the course are registered/enrolled with the parent university, are subject to its rules and regulations, and are awarded qualifications by it (with the implication that the university monitors, quality assures and validates the company’s courses), it is likely that the company is acting as an institution, school or hall of a university and is therefore an eligible body.

HMRC’s view is that:

  • a university owned/controlled company with close academic links to its parent university that 
  • is delivering university-level education leading to a qualification; is likely to be acting as a college or an institution of the university. The absence of formal recognition as such a body, or the fact that it may trade with a view to profit did not exclude that company from that classification for the purposes of Note (1)(b).

    HMRC concludes that in most cases where a university trading company is providing education it is acting as if it were a college, institution, school or hall of a university. The effect of this is that the company would fall within Note (1)(b) and would be an ‘eligible body’ for the purposes of the Group. Any education or training it provided would have the same VAT treatment (exempt) as if it had been made by the university.

    Once a university subsidiary company is an eligible body within Note (1)(b):

  1. all supplies of education and vocational training provided by that company are exempt from VAT;
  2. any supplies which fall within Group 6 of Schedule 9 VATA 94 should be treated as an exempt supply, for example supplies of goods which are closely related to the supply of education under item 4.

Other supplies, in particular consultancy services, provided by a subsidiary company of a university remain subject to VAT at the standard rate.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)