Q:
I am having difficulty trying to understand if my education services will be VAT exempt despite my reading the VAT guidelines! I am a sole trader/private tutor and my work involves a number of areas all to do with special educational needs such as Dyslexia. I provide advice and training to schools to help support the students in the school. I do educational assessments of students and give them recommendations about how they can learn better. I train teachers so they can understand Dyslexia better and provide better for those students with Dyslexia. I also visit schools to look at how they are providing SEN and then train the teachers as to how they can provide better for the students. Another role is as a guest lecturer teaching teachers who are completing post graduate courses in SEN. As SEN students are taught in SEN lessons in schools then I presume this is considered a subject. Does anyone have an idea as to whether this is VAT exempt?
Many thanks!
A:
The VAT liability of education and training is a difficult subject and I find the VAT Notice difficult to follow. The other thing is that you provide a number of different services and it’s possible that some of your services might be exempt while others may be standard rated. Obviously I can’t give you advice about the VAT liability of any of your specific services here on the forum but I hope that this reply will at least help you to work out the liability of each of your services as and when you come to finalising contracts and/or issuing bills to your clients.
The reason that the VAT notice is difficult to follow is because the liability depends not only on the nature of the service that you’re providing, but also whether the recipient or in some cases the supplier is an “eligible body” as defined in the legislation, and also how the training is funded. That’s why the notice is so long and detailed and also why it’s taken me a while to post this reply, as I wanted to take the time to explain why it’s so complicated and hopefully help you work out the liability of your services.
Because the liability depends on a number of factors, the VAT notice is actually quite difficult to read because it has to include a lot of detailed information on different aspects of the same issue. You have to find a way of navigating through it all and I think that the key is to go back to the legislation, which set out at section 17 of the VAT notice, here http://tinyurl.com/5vg55b7. I don’t normally advise reading the legislation unless you’re an accountant or otherwise have some working knowledge of VAT, but in this case I think it’s the easiest way of working out the answer.
What does the legislation say?
The liability depends on three main criteria, which are as follows:
• Education of a type normally provided by schools, colleges, universities.
• The supplier has to be an “eligible body”, which is normally a publically funded educational establishment or non-profit making organisation.
• Exemption for certain types of training if funded by certain government sponsored training schemes.
So to qualify for exemption, your services have to fulfill one or more of these criteria, depending on the part of the legislation concerned. And to begin with, I’d have to say that based on the information that you’ve provided, it seems to me that none of the specific services you supply will qualify for exemption, unless they qualify as government funded vocational training. You don’t seem to be providing education, which is normally subject matter taught in schools or university, nor do I think that you are an “eligible body”, which is normally an eduational establishment or a non-profit making body. I am paraphrasing here but it seems to me that you are providing a mix of vocational training and consultancy services as a business activity which is liable to VAT at the standard rate.
The way I read it, the legislation says that the following can be exempt from VAT:
• Item 1: Education, research to an eligible body, vocation training if provided by an eligible body.
An eligible body covers a variety of publically funded organisations which provide eduation or training, eg a school or a college, or non-profit making organisations as explained in section 4 of the notice. I don’t think that this would cover you. Some of your work might qualify as research, but the exemption only applies if the research provided TO an eligible body can only be exempt if the supplier is also an eligible body, which I assume that you aren’t.
• Item 2: Private tuition of a subject normally taught in schools etc.
I don’t think that you’re providing private tuition.
• Item 3: Certain examination services
Again I don’t think this would cover your situation.
• Item 4: Certain goods or services linked to the provision of education, vocational training etc
This normally covers goods and services that are closely related to the provision of education, training etc that are for the direct use of the pupil, such as accommodation, learning materials, OR certain supplies made to the school, college etc by other eligible bodies. As you aren’t an eligible body your services probably wouldn’t qualify for exemption under this section.
• Item 5: Certain government funded vocational training
This applies to certain training that is paid for through the specific government training schemes as set out in the legislation and explained in the notice at section 13. You say that you are providing training and therefore this aspect of your services may apply for exemption, but you’d have to establish how your services are being funded.
Practical issues
The key in these sorts of situations is to look at each supply that you make and see whether or not it is covered by any of these exemptions. I assume that you enter into a different contract with each client, so you’d need to establish whether or not each of these falls within the exemption. The important thing is to ensure that your contract states that the agreed fee is VAT exclusive and that VAT will be added if your service is liable to VAT. That way, you’re not out of pocket if you have to charge VAT. Some of your clients will be able to recover the VAT that you charge, depending on their VAT status, but this doesn’t affect the VAT liability of your services.
If you are struggling to work out the liability of any specific service, you can write to HMRC and ask them for a ruling about that particular supply. They won’t answer hypothetical or general questions, but if you send them a copy of a contract and explain the nature of the service you’re providing, they will give a ruling. Alternatively, I’d be pleased to help through my formal consultancy service – just drop me a line using the contact form.
Marie