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HMRC internal manual

VAT Taxable Person Manual

Particular trades: driving schools: to whom do the instructors supply their services, the school or the pupils?

If you are satisfied that the driving instructors are not employees of the school, you need to decide to whom they supply their services. This is a question of looking at the relationship between the school and the instructor, and deciding how much control the school is able to exert. The fact that pupils would believe they were being supplied by the driving school is not a prime consideration; it is possible for the school to be acting as agent for a number of undisclosed principals, the individual instructors. There are two scenarios, with characteristics as follows.

  • The instructors supply their services to the school; the school supplies tuition to the pupils Here the school provides a number of services to the instructors and maintains a relatively high degree of control over them. It plays a prominent role in setting fees to pupils, and requires detailed records to be submitted by the instructors, so that it can calculate what each instructor will receive. Normal practice is for monies to be passed in full to the school, and only passed back to the instructors when the necessary deductions have been made.
  • The instructors supply their tuition to the pupils directly, using the driving school as their agent Here the school provides little more than a booking service and meeting place. It charges a fixed fee for these services to the instructors and is not concerned beyond making sure that it receives that fee. Instructors can thus work when they like, for as long as they like, and can vary their charges.

You will, however, often find that the situation is far from clear, with some pointers in one direction and others in the opposite. To reach the correct decision you will have to consult the table below, which lists a number of factors to consider. You may also find it helpful to consider the following Tribunal cases, either for clarification, or to justify your decision to the trader.

The High Court in the case of John Cronin trading as Cronin’s Driving School ([1991] STC 333), and the tribunal in Reeds School of Motoring (MAN/86/103), both found that the instructors were supplying their services to the school, who were in turn supplying tuition to the pupils.

In contrast, the tribunals of Fleet School of Motoring (MAN/90/1064), and A B McIver trading as Alan’s School of Motoring (EDN/90/28), found that the instructors supplied tuition direct to the pupils.

List of factors to consider

This table lists a number of factors which will indicate whether the instructors supply the school with services, in order that the school may make an onward supply of tuition to the pupils, or whether the instructors supply their tuition direct to the pupils. All of the factors listed are drawn from tribunal decisions and casework.

You should reach a decision on each factor and then weigh up all these decisions to find the majority view.

### Factor ### Indicates a supply of driving tuition to pupils by the driving school, using the services of self-employed instructors engaged under contracts for services ### Indicates a supply of driving tuition from the instructors direct to the pupils
1. Allocation of pupils School usually allocates pupils to instructors who cover their geographical area. Intending pupils usually choose their own instructor by examining literature held on the school’s premises and comprising a photograph and details of qualifications, fees charged, etc.
2. Fees to pupils School plays a major role in setting fees: either dictating their level, or participating at regular meetings with instructors to set uniform and binding fee structures. School either allows instructors complete freedom to decide meetings to advise on levels. In practice, some instructors charge more than others.
3. Ownership and costs of vehicles School usually owns vehicles which it either lets the instructors use, or hires out for a fee. School meets costs of maintaining, insuring and repairing the vehicles. Instructors provide their own cars and meet their own expenses.
4. Fees from instructor to school Instructors pay a variable fee to the school, retaining more of the hourly payment the more lessons they give. School makes up fees if they fall below a minimum level. Instructors pay a fee to the school which is either fixed per lesson or per week. Anything they earn above this is thus their profit.
5. Overall advertising costs Borne by school. Separate charge made to instructors to cover advertising costs.
6. Payment by pupils Cheques must be made out to the school, although they may be collected by the instructors. Pupils pay instructors direct, whether by cash or cheque.
7. Facilities provided by school Might extend to hire vehicles booking service, record-keeping and training facilities. Limited to booking service, meeting room and waiting place.
8. Division of payment Full payment by pupils must initially pass to the school, who will then pass the balance back to the instructors after making deductions. Full payment by the pupils should initially go to the instructor, whose responsibility it is subsequently to pay the school. If cash is received by the school that cash is handed over in full to the instructor. If cheques are received, they are either held in a separate account or cashed and passed on in full to the instructor.
9. Record keeping School maintains detailed records of the takings and deductions of each instructor. Instructors keep their own records and appointment cards.
10. Advertising on cars All cars painted with school logo. Detachable advertising boards provided for cars; instructors under no obligation to use them.
11. Cancelled appointments School will arrange for another instructor to cover in the event of the original instructor cancelling. School merely passes on cancellation messages and plays no active part.
12. Freedom of instructors School is sole booking agent: instructors may not work elsewhere. Instructors free to work when they please and can take on pupils independently of the school.
13. Dealing with complaints Complaints must be forwarded to the school who might settle them if the instructor could not (for example by offering a free lesson). Complaints entirely a matter between instructor and pupil.