Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether he plans to review the VAT treatment of further education colleges ahead of the Autumn Budget 2026; and what assessment he has made of the potential merits of allowing colleges to reclaim VAT on capital expenditure in line with schools and academies.

For their non-business activity, FE colleges are unable to reclaim VAT incurred. We operate VAT refund schemes for schools and academies which are designed variously to ensure that VAT is not a burden on local taxation, and that academies are not disincentivised to leave Local Authority control. FE colleges do not meet the criteria for either scheme.     
 
In relation to business activity, FE colleges recieve an exemption from VAT which means that they do not have to charge VAT to students but cannot recover it either.

The Government is continuing to look into the VAT position of FE colleges. The Chancellor makes decisions on tax policy at fiscal events, and does not routinely comment on proposals.