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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): citizenship tests

The Government wishes to ensure that individuals who may seek British citizenship have an understanding of one of the native languages of the United Kingdom, English, Welsh or Scottish Gaelic. The purpose of this policy is to ensure that migrants seeking naturalisation to the UK have an opportunity to become fully integrated into the UK way of life, and therefore equip those seeking naturalisation with the necessary language skills to be a full and active member of society.

The Home Office (UK Border Agency) has contracted with the Ufi to manage and arrange the delivery of the citizenship tests via a network of test centres.

VAT liability of supplies

Licence fee and payments made to the Ufi/learndirect by the Home Office

If the income received from the licence fees will not cover the costs of the Ufi/learndirect, a payment is made by the Home Office to fund the deficit. This payment is deemed to be a subsidy, and is not directly linked to the cost of the supplies made. Consequently, this payment is considered to be outside the scope of VAT.

However, the licence fees (£5.52 net to 31 March 2011; £11.66 net from 1 April 2011) paid by the test centres to the Ufi/learndirect is a consideration for a supply which is taxable at the standard rate.

Candidate fee

The candidate fee (£28.86 net to 31 March 2011; £40.00 net from 1 April 2011) is a consideration for a supply. The charge for sitting the test is made to the candidate by the individual test centres. This payment is retained by the Test Centre for their services of:

  1. dealing with the booking and enquiries arising,
  2. registration of candidates,
  3. delivering the test,
  4. issuing the result,
  5. handling complaints,
  6. Self-assessment as part of a quality assurance programme.

This fee is liable to VAT at the standard rate.

Application processing fee

A fee (at the time of writing £200) is paid by the candidate to the Home Office for processing the application for citizenship. This is a statutory charge which is paid to, and retained by the Home Office. This supply is outside the scope of VAT.

Ceremonial fee

A £68 ceremonial fee is collected by the Home Office and passed to the Local Authority. This supply is also outside the scope of VAT.