Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether his Department has made an estimate of the potential annual cost to the Exchequer of introducing (a) a targeted VAT refund scheme for eligible further education colleges’ spending on publicly funded education and training and (b) a scheme initially limited to colleges’ capital expenditure.

For their non-business activity, FE colleges are unable to reclaim VAT incurred. This applies to both capital and non-capital expenditure. The Government operate VAT refund schemes for schools and academies which are designed 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.

Whilst the Government does continue to look into the VAT position of FE colleges, we do not generally publish internal evidence relating to, or assessments of, tax changes where a decision has not been taken. Any decisions on tax policy are announced with accompanying costings at fiscal events, in the context of the overall public finances

In relation to business activity, FE colleges enjoy an exemption from VAT which means that they do not have to charge VAT to students but cannot recover it either.