VAT on Education and Training

Introduction

VAT treatment of education and training in the UK changed significantly from 1 January 2025. While most education provided by eligible bodies remains exempt from VAT, private schools must now charge 20% VAT on education, vocational training, and boarding services. Understanding what qualifies as exempt education and how VAT applies to related goods and services is essential for education providers and businesses offering training.

The Major Change: VAT on Private School Fees

Since 1 January 2025, all education services and vocational training provided by private schools in the UK for a charge have been subject to VAT at the standard rate of 20%. This includes boarding services (accommodation where pupils live in school during term time) provided by private schools.

Before this date, these services were VAT exempt. The change also applies to services provided by a "connected person" to a private school, where arrangements are in place mainly to continue benefiting from VAT exemption on supplies that should be taxable.

VAT is due on the total of everything received in return for providing education to a student. This includes the amount paid by parents and any external bursary paid for that student's education.

What Qualifies as Exempt Education

Education provided for no charge—such as by local authority maintained schools, city technology colleges, sixth form colleges, academies, and free schools—remains outside the scope of VAT. When education is provided for no charge, any closely related goods or services provided at or below cost are also outside the scope of VAT.

For education providers other than private schools, vocational training provided by an "eligible body" remains exempt from VAT. An eligible body includes organisations specifically established to provide education or vocational training.

Nursery and Reception Classes

Nursery classes remain VAT exempt. A nursery class is one wholly or almost wholly made up of children below compulsory school age (5 in England and Wales, 4 in Northern Ireland) or school age in Scotland (5 years old).

English as a Foreign Language

Tuition in English as a foreign language remains exempt from VAT, even when supplied by a commercial provider, private school, or person connected to a private school. However, any other education provided by these commercial providers is standard-rated at 20%.

Classroom Supplies and Closely Related Services

Goods or services supplied for the direct use of pupils, students, or trainees that are necessary for delivering education provided by a private school or connected person remain VAT exempt. These are known as "closely related" supplies.

This exemption applies when the goods or services are essential to the education being provided and are supplied at or below cost.

Single Supply vs Separate Supplies

When a school supplies multiple goods and services together as a package for a single fee, this is normally treated as a single supply for VAT purposes. The entire package has a single VAT treatment based on the main element of the supply.

For example, if a private school charges a flat fee that includes education, transport, and meals, this is typically a single supply of education subject to 20% VAT on the entire fee.

However, if a school supplies education and also supplies other elements for a separate fee, these are normally separate supplies, each with its own VAT liability. For instance, if a school offers school meals for a separate charge alongside the education fee, these are two different supplies that may have different VAT treatments.

You should not artificially split packages to create separate supplies with different VAT liabilities.

Special Educational Needs and Disabilities (SEND) Therapies

When pupils receive both education and therapy services at school, the VAT treatment depends on who supplies the services and whether they form part of a single supply or separate supplies.

Healthcare services supplied by registered healthcare professionals (such as speech and language therapists or educational psychologists) qualify as exempt from VAT when the primary purpose is protecting, maintaining, or restoring a person's health.

Example 1: A school charges a flat fee including all education and therapy. Pupils attend educational classes and therapy sessions throughout the day. The fee doesn't change based on the amount or type of therapy received. This is likely a single supply of education (the dominant element), so the entire fee is standard-rated at 20%.

Example 2: A school charges a fee for education but doesn't employ therapists. Parents contract and pay therapists directly. The school is not supplying healthcare services, so only the school fee is standard-rated. Therapists must determine whether their supplies qualify for the healthcare exemption.

Example 3: A school directly employs therapy providers and charges a separate additional fee for therapy services. This creates two separate supplies. The education fee is standard-rated at 20%, but if the therapy services meet the conditions for healthcare exemption, the school doesn't charge VAT on them.

Education and Welfare Services

When education is supplied together with welfare services, you must determine whether the main element is welfare or education.

Welfare services can be exempt from VAT when the main element of the supply is welfare—for example, supervision and guidance provided to a vulnerable person to develop capacity to live independently. However, if a school is providing education to a pupil and the parent considers they're buying education, any welfare provided is secondary. This creates a single supply of education for VAT purposes, which is standard-rated for private schools.

Examples of exempt welfare services include day care services provided by playgroups or after-school clubs (but not activity-based clubs like dance classes), which relate to the care and protection of children.

Some specialist SEND schools may provide both care and education. The VAT treatment depends on the main element of the supply. Where a SEND school provides education for a fee, this is subject to VAT at 20%.

Grant Payments

Whether VAT applies to a grant payment depends on the exact nature of the grant arrangements.

Block grant funding that doesn't relate to individual pupils (such as block grants from the Education and Skills Funding Agency) is normally outside the scope of VAT because there's no direct link between the payment and a supply of services.

Vocational Training

Vocational training provided by an eligible body (other than a private school) remains exempt from VAT. Vocational training provided by a private school or connected person is taxable at the standard rate of 20% from 1 January 2025.

Vocational training provided by a body that isn't an eligible body is exempt to the extent it's funded under an approved government funding scheme.

Business Activities for VAT Purposes

An activity is a business activity for VAT purposes if it's mainly concerned with making supplies to other persons for any form of payment and continues over a period of time with some degree of frequency and scale. Don't assume an activity is non-business simply because it makes no profit.

If education is provided for any form of payment, it's a supply for VAT purposes. If no payment is received, it's outside the scope of VAT.

Sources

• Charging and reclaiming VAT on goods and services related to private school fees
• Education and vocational training (VAT Notice 701/30)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.