HMRC has issued Revenue and Customs Brief 11 (2018) regarding the amendment of VAT law from 1 August 2019 to ensure continuity of VAT treatment for English higher education (HE) providers under the Higher Education and Research Act 2017, as announced at Budget 2018.
The change in legislation applies to English HE providers who register with the Office for Students (OfS) in the Approved (fee cap) category. There are no changes to the VAT law affecting education in Scotland, Wales and Northern Ireland.
VAT exemption currently applies to UK universities and their colleges, institutions conducted by higher education corporations (HECs) and other institutions that are designated as eligible to receive support from central funding.
There are changes to the way that HE providers are funded by the OfS from the start of the 2019 to 2020 academic year. These changes require an amendment to be made to the statutory definition of an eligible body in Note 1(c) of Group 6 of Schedule 9 to the VAT Act 1994.
Paragraph 4.1 of VAT Notice 701/30 (Education and Vocational training explains that an eligible body includes ‘a school, university, sixth form college, tertiary college or further education (FE) college or other centrally funded higher or FE institution’ (defined as such under the Education Acts).
In order to be bodies entitled to exempt their supplies, those English HE providers which are currently exempt by virtue of being HECs or designated institutions, will in future need to be registered by the OfS in the Approved (fee cap) category. All English HE providers who will become registered in the Approved (fee cap) category will also become entitled to exempt their supplies in future.
The overall impact of the change is to ensure that those HE providers that are currently eligible to receive central funding can continue to exempt their supplies of education.
Further information and guidance can be found at VAT rules for higher education providers (VAT information sheet 08/18).