What Are the VAT Exemption Policies for Education Providers?

For UK education providers, the treatment of VAT on education is shaped by a range of factors that influence how supplies are classified for VAT purposes. These include the status of the provider, the nature of the services supplied and the wider context in which those services are delivered.

This guide explains how VAT on education applies across different types of education providers and their activities, outlining where VAT exemption is available and the circumstances in which VAT must be charged.

Public schools and state-funded education providers

State-funded schools, academies and further education institutions maintained by local authorities (as well as certain not-for-profit providers) do not charge VAT on the core provision of education. Their teaching services fall squarely within the education exemption (or fall outside the scope of VAT as they do not constitute business activities).

In addition, many public sector bodies are able to reclaim VAT on qualifying expenditure under specific refund mechanisms, provided the costs relate to their statutory educational functions.

However, public education providers may still be required to charge VAT where they undertake activities that sit outside the scope of education. These commonly include:

• Hire of facilities to third parties, such as sports halls or meeting rooms, where no exemption applies.
• Sales of goods that are not closely connected to teaching activities.
• Vending machine income.
• Other commercial activities supplied to non-students.

Each activity must be reviewed separately, as VAT treatment depends on the precise facts rather than the status of the institution alone.

Private schools and fee-paying education providers

Education and vocational training supplied by private schools and colleges for a fee is subject to VAT at the standard rate of 20%. This represents a clear distinction between public and private provision for VAT purposes.

Where education is supplied by a commercial provider, a private school or a person closely connected with such a school, the general exemption no longer applies. The only exception retained in this context is the teaching of English as a foreign language, which remains exempt when supplied in qualifying circumstances.

That said, some supplies that are closely related to education may still fall within the exemption, depending on their nature. This can include certain classroom materials or nursery provision operated alongside fee-paying education, although each case requires careful analysis.

VAT position of individual tutors

Private tuition can still qualify for VAT exemption, but only where strict conditions are met.

An individual tutor providing tuition personally in subjects ordinarily taught in schools – such as mathematics, English or science – does not need to charge VAT, provided the tuition is supplied directly by the individual as a sole trader or within a partnership.

Once that tuition is supplied through a company, agency or other intermediary, the exemption no longer applies. In those circumstances, the supply is treated as standard-rated and VAT must be charged if the provider is VAT registered or required to register.

Boarding, accommodation and related charges

Accommodation and catering supplied by private schools, or by persons connected with them, is treated separately from tuition. Charges for boarding, meals and residential facilities are taxable at the standard rate of 20%.

This applies even where accommodation is provided during term time and is closely associated with the delivery of education. Providers should take care to identify and account for these supplies correctly, particularly where fees are bundled.

Early years education and VAT exemption

Education provided to children below compulsory school age remains exempt from VAT. This includes nursery provision and reception classes in England and Wales.

As a result, providers of early years education do not charge VAT on these services, and the income does not count as taxable turnover for VAT registration purposes.

VAT registration considerations for education providers

Education providers must monitor their VAT position carefully, particularly where they supply both exempt and taxable services.

VAT registration is required where taxable turnover exceeds £90,000 in any rolling 12-month period. Exempt education income does not count towards this threshold, but taxable income from ancillary or commercial activities does.

Once registered, providers must:

• Apply the correct VAT treatment to each supply.
• Submit VAT returns in line with Making Tax Digital requirements.
• Manage VAT recovery correctly, particularly where partial exemption applies.

Incorrect treatment of education income can lead to underpaid VAT, restricted input VAT recovery, or HMRC assessments following a review.

Meeting HMRC compliance expectations

HMRC expects VAT-registered education providers to maintain clear and accurate VAT processes throughout their operations. This includes:

• Confirming the VAT liability of all income streams, so that exempt and taxable supplies are identified correctly.
• Retaining detailed records and valid VAT invoices for at least six years, in line with statutory record-keeping requirements.
• Applying the correct VAT rate to all taxable supplies, taking account of any changes in legislation or guidance.
• Submitting VAT returns accurately and on time, in accordance with Making Tax Digital requirements.
• Paying any VAT due within the prescribed deadlines set by HMRC.

Where an education provider makes both exempt and taxable supplies, partial exemption calculations may be required to establish how much input VAT can be reclaimed. These calculations should be reviewed regularly to reflect changes in activities or income streams.

Failure to meet HMRC’s requirements can result in assessments for underpaid VAT, interest charges, financial penalties, and increased scrutiny through compliance checks or VAT inspections. By following the principles above and maintaining consistent VAT processes, education providers can meet their obligations and remain compliant with HMRC’s requirements at all times.