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HMRC internal manual

VAT Education Manual

HM Revenue & Customs
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Group 6 Item 5 vocational training: learndirect, University for Industry (Ufi): operation from August 2006 to July 2010

In Wales and Northern Ireland the business model remained unchanged from the model in place from August 2004 (see VATDU59250). The guidance on the rest of this page only applies to the business model for England.

In England, Ufi received grant funding from the Skills Funding Agency (SFA). The ‘learning provider’ contracted with the learner for funded and unfunded learning. A learning agreement was issued by the provider’s Learning Centre.

The grant funding that Ufi provided to ‘learning providers’ comprised of:

  1. learner
  2. licence fee funding.

As set out in the Learning Provider Agreement, Ufi provided a single composite supply of ‘learndirect’ educational services which the ‘learning provider’ was licensed to use. For this single composite supply Ufi made:

  1. an annual charge for funded learning services enrolments,
  2. charges on a pay-as-you-go basis for unfunded learning enrolments,
  3. charges for branding and marketing materials and other goods and services on a pay-as-you-go basis.

‘Learning providers’ sold to learners

  1. funded learning - partly paid from learner funding provided by Ufi and partly paid from fees payable by learners.
  2. unfunded learning - fees paid by the learner.

Liability of supplies made

A grant provided by the SFA to Ufi continued to be a supply outside the scope of VAT, as too was the onward transmission of the grant to the ‘learning provider’.

The non-exclusive licence was a standard-rated supply in respect of software, learning materials, marketing and support.

The charge from Ufi to the ‘learning provider’ for unfunded learning services and for branded materials and other miscellaneous goods or services was standard-rated.

The status of the supplies between the Learning Provider and the Learner were as follows:

  1. Where the ‘learning provider’ was an eligible body:
all learner fees were VAT-exempt;

input VAT on costs directly and exclusively relating to the provision of the education were not recoverable (subject to partial exemption).
  1. Where the Learning Provider was not an eligible body:
all learner fees and unfunded charges payable by the learner were subject to VAT at the standard rate; 

any input VAT on costs directly and exclusively relating to the provision of the taxable unfunded learning, for example pay-as-you-go charges from Ufi for unfunded learning. were recoverable in full; 

any input VAT on costs directly and exclusively relating to the provision of the 'funded' education services were not recoverable (subject to partial exemption); 

any input VAT incurred on costs which were not directly and exclusively attributable to taxable or exempt supplies (residual VAT), for example overheads, were recoverable subject to the Learning Provider's partial exemption method.