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HMRC internal manual

VAT Education Manual

HM Revenue & Customs
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Group 6 Item 5 Vocational training: treatment of subcontractors to providers of vocational training under a government-approved scheme

Government approved schemes for the unemployed

Training providers may be in receipt of funding from any of the sources listed in VATEDU55500. Where a subcontractor makes a supply of either

  • services to one of these providers; or
  • goods and services directly to trainees (that are essential to the training);

it should not charge VAT to the extent that the provider is making payment using that funding.

Statutory living allowances etc

Any funding that a subcontractor receives but must pass on to trainees or students as:

  • statutory living allowances;
  • travel costs; or
  • lodging expenses

is outside the scope of VAT - it does not form part of the consideration for the supply of vocational training. (But see also VATEDU56500 and VATEDU57900).

Similar training supplied to businesses for their employees or directly to individuals

The subcontractor is responsible for accounting for VAT where it is due but also for exempting its supplies when they qualify for exemption. Therefore:

| If your trader is… | then… | and it should… | | ——————————————————————————————————————- | —————————————————————————————————————————————————————————————————- | ——————————————————————————————- | | an eligible body (see VATEDU39000) | its supplies are exempt | not charge VAT | | not an eligible body (see VATEDU39000) | it must find out from the customer whether its supplies are ultimately funded by any of the bodies listed inVATEDU55500 | * ask for evidence; * keep it; and * exempt its supplies to the extent of that funding. |

Work placement providers (WPPs)

Taxable services from the Training Provider to the WPP

If a WPP supplies work experience to a trainee or an employee of another business or a college student under one of the Government’s approved vocational training schemes, the business or college must charge the WPP VAT because it benefits from the services of the trainee, employee or student. This is separate from the WPP’s supply of exempt vocational training to the trainee.

Consideration for the supply of trainees’ services

Unemployed trainees qualify for a statutory living allowance and, possibly, expenses. If the WPP has to fund any part of such allowances or expenses from its own resources, the amount it pays is consideration for the standard-rated supply to it of the trainee’s services by the training provider or further education college. This is the case even though it may make no actual payment to the training provider or college itself.

Trainees as the WPP’s own employees

If a trainee is also the WPP’s own employee, any payments it makes to him or her as wages or allowances are outside the scope of VAT.