Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will make it his policy to give further education corporations the same VAT status as Multi Academy Trusts and 16 to 19 Free Schools.

This question was answered on 7th March 2022
Under UK VAT rules, the supply of education is outside the scope of VAT, as a non-business activity, if provided without a charge. When a charge is applied, it is exempt from VAT if provided by certain eligible bodies, usually not-for-profit. This includes universities, sixth form colleges, further education colleges, and other educational providers that comply with regulations set by the UK Government.

Local Authority maintained schools, as well as voluntary controlled, community, and foundation schools are all able to reclaim any VAT incurred on the costs of the provision of education through a refund scheme provided under section 33B of the VAT Act 1994. This ensures that the burden of VAT does not otherwise fall on local taxation.

Academies and free schools are also covered by the VAT refund scheme; this is to ensure that institutions leaving Local Authority control are not at a financial disadvantage due to their change in status.

Sixth form colleges and further education colleges are not included in the section 33B refund scheme. Like many other providers of public services, they are expected to cover their VAT costs from their funding allocations, which include these VAT costs. Sixth form colleges have the choice to restructure as academies, enabling the recovery of VAT under the refund scheme, but many choose not to.

While the Government keeps all taxes under review, there are no current plans to change these provisions.