VAT on Training Courses

[jwalker]

Hi, can anyone assist with this query as the VAT office dont seem to be able to.

Clients have just set up a Ltd Company, and they are going to be offering training courses to people who want to become qualified as counsellors. They are COSCA courses, which are also taught by colleges, and are mainly assessment based,not exam based. They have also developed courses for counselling training which have all been approved by the relevant bodies and have qualifications at the end of the courses.
It seems that if they were either sole trader or partnership that the courses would be exempt, but VAT office could not definately say whether it is vatable if they are Ltd. They have quite a bit of VAT to reclaim on purchases, furniture, rent etc, and would like to be able to reclaim this, but we need to know categorically if they have to charge VAT on the courses. Any help appreciated.
Thanks, Jane

 

[Kevin Hall]

This is a very difficult area. Indeed, such is the complexity that we have in the past prepared VAT arguments using the different approaches throughout the EC, though we unfortunately did not get the chance to pursue these arguments to their conclusion.

As a rule of thumb, limited companies which are not "eligible bodies" will be subject to VAT. But checking whether you are an "eligible body" can get surprisingly tricky.

Principal EC VAT Directive:

CHAPTER 2
Exemptions for certain activities in the public interest
Article 132
1. Member States shall exempt the following transactions:
...
(i) the provision of children's or young people's education, school or university education, vocational training or retraining, including the supply of services and of goods closely related thereto, by bodies governed by public law having such as their aim or by other organisations recognised by the Member State concerned as having similar objects;
(j) tuition given privately by teachers and covering school or university education;

Of course, if the school is not an "eligible body", although it can recover VAT on its purchases, it will also have to charge VAT on its supplies (education). So this is not a benefit to the school. It is merely a question of getting the VAT right.

The detail and the documents might be key. Have you considered seeking specialist assistance?

 

[Anna Chandley]

Dear Jane

Firstly, the VAT treatment will be the same regardless of whether the trader is a company, partnership or sole trader.

Only educational services supplied by an eligible body will be exempt for VAT. Eligible bodies are usually Universities, schools etc but you will need to check the HMRC manual to check if the company will qualify as an eligible body. The manual you need is "V1-7 Chapter 21: Education" - if you put this in google you should get a link to the manual.

If the company is an eligible body making exempt supplies of education then it cannot register for VAT and cannot therefore reclaim any purchase VAT. If there are other standard related supplies then the company will be partially exempt and may need to register for VAT.

If the company is not an eligible body then it will be making standard rated supplies and will need to register for VAT if turnover exceeds the registration limits and if VAT registered will be able to reclaim VAT on purchases.

The company may also make some zero rated supplies if it provides books and other printed matter. For zero rated supplies VAT is charged at 0% and all VAT on purchases can be reclaimed (if VAT registered).

The company should take advice from an accountant to ensure the VAT treatment is correct.

Anna

 

[Kevin Hall]

Firstly, the VAT treatment will be the same regardless of whether the trader is a company, partnership or sole trader.

Anna, I am not sure I agree on this point. See the Principal EC VAT Directive:

CHAPTER 2
Exemptions for certain activities in the public interest
Article 132
1. Member States shall exempt the following transactions:
...
(j) tuition given privately by teachers and covering school or university education;

This is reflected in UK VAT law (VAT Act 1994, Schedule 9, Group 6), which states that the following shall be exempt from VAT:

The supply of private tuition, in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer.

This is reflected in HMRC VAT Notice 701/30, which states at Section 6:

6.1 What's "private tuition" and when are my supplies exempt?
If you're an individual teacher working in a personal capacity, if you're a sole proprietor or member of a partnership:

… if you're a sole proprietor or member of a partnership and the subject you teach is also taught regularly in a number of schools or universities, then you're supplying private tuition and your supply is exempt.

… if you're a sole proprietor or member of a partnership and you take on a teacher or teachers to help you carry out the instruction, then even though the tuition you deliver yourself may still qualify as exempt private tuition, the tuition others deliver is standard-rated.

If you take on a teacher or teachers to help you, you may choose either to:
·apportion your supplies of tuition between exempt and taxable elements, using any fair and reasonable method of apportionment; or
·treat all your supplies of tuition as taxable regardless of who actually delivers it.

The requirement that the tutor be private, in the sense of being a person rather than a company, is built in from the start. The trouble is that this is not expressed sufficiently clearly (in my view) and can be somewhat misleading. But I think the overall interpretation (at least for individual independent tutor, versus person employed by someone else, such as a company) is now clear, not least due to caselaw etc.


Really, it just goes to show how complex this area of VAT is and reinforces the view that professional VAT advice should be sought, which takes account of the details of the particular circumstances of this activity.

Hope it helps?

 

[Anna Chandley]

Kevin's analysis is correct so please ignore the bit in my earlier post when I said it wouldn't make a difference if it was a company, partnership or sole trader.

Anna