Private Tuition VAT Exemption

VAT on private tuition is a topic that has generated a lot of interest in recent years. The answer to whether private tuition is subject to VAT is not as straightforward as it initially appears.

The supply of private tuition is exempt for VAT purposes if it meets the following criteria Section 6 of VAT Notice 701/30, Education:

• The tuition is provided by a sole practitioner or member of a partnership, and
• The subject is one taught regularly in a number of schools or universities.

Therefore, private tuition is standard rated for VAT if it is

• Provided through a limited company (because the individual teacher is not acting independently of an employer);
• Provided by employees or subcontractors on behalf of a business; and
• A subject not commonly taught in schools or universities.

However, there are a few complexities to add to these seemingly straightforward rules.

Uncertainty around VAT exemptions

When is a subject VAT exempt?

What does it mean by ‘taught regularly’ – how often and how widespread does the subject need to be taught?

HMRC has never given an exact definition of ‘taught regularly’, as in how many, or what percentage of schools or universities have to teach it to qualify. This condition of exemption is one that HMRC has challenged in the past, and with a definition that is open to some interpretation, tutors should carefully consider the eligibility of their subject to avoid any unexpected VAT penalties.

Over the years Tribunals have evaluated the scope of qualifying subjects. In broad terms, it seems the subject being taught should not be one that is purely recreational – for example belly dancing, yoga or pilates.

Recreational subjects sit on more uncertain ground when it comes to being VAT exempt. This is clearly illustrated in the Upper Tribunal’s (UT) verdict in the case of Anna Cook [2021] BVC503 and the enquiry into whether Ceroc dancing classes qualified for VAT exemption as private tuition. The UT ruled in favour of HMRC, confirming that Ceroc dance was not a subject ordinarily taught in a school or university. The firm intends to contest this ruling in the Court of Appeal, with such a verdict having possible tax implications for private dance tutors across the country.

There is further guidance on this in VAT Manual VATEDU40200 which includes some examples and Tribunal decisions.

Future uncertainty

The topic of VAT and private tuition is one that has the potential to create VAT issues for many tutors going forwards, particularly as the guidelines for subjects ‘regularly taught’ evolve and the approach to those subjects commonly taught in schools and universities changes.

Whilst it would be pretty unthinkable for HMRC to say that private tuition of say mathematics, or science for example, is not a subject ordinarily taught in schools or universities, now some forms of dance have been ruled as subject to VAT at standard rate, it is possible that other subjects may also come under the spotlight.

The message for now is to sit tight, and if you have been correctly applying the VAT exemption for private tuition under the current rules and interpretations, continue to do so until and unless there is a significant change. We will update as to any new rulings on this matter as they are published.

If you have any queries regarding the issues raised in this article please contact our VAT Team.