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HMRC internal manual

VAT Partial Exemption Guidance

HM Revenue & Customs
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Guidance for specific trade sectors: educational establishments: Educational establishments and an overview of the education sector

Educational establishments

Where educational establishments are VAT registered, they are subject to the same rules as other partly exempt businesses, therefore any partial exemption method (whether the standard method or a special method) must be fair and reasonable and reflect the business activities of the registration.

Both higher education institutions (HEIs) and further education colleges (FECs) can have a mixture of non-business activities and regulation 103 supplies, as well as taxable and exempt supplies so it is essential that all these are taken into consideration and accounted for appropriately and in the correct order (seePE21000 - Attribution).

Some examples of the types of activities and supplies provided by HEIs and FECs are given in PE71400 - Activities and supplies provided by HEIs and FECs - although this list is not exhaustive.

Overview of the education sector

This guidance concentrates on the partial exemption implications for educational establishments consisting of:

  • Higher Education Institutions (HEIs), which include universities that award degrees and above; and
  • Further Education Colleges (FECs) that provide education to students aged 19 years or under (18 or under in Scotland).

Although this appears to be clearly defined, in reality some HEIs will also provide education to students aged 19 or under (18 or under in Scotland) and some FECs will provide degree courses - often on behalf of the HEIs. This is why the partial exemption issues are broadly similar and this guidance applies equally unless otherwise stated.