The Scope of VAT Exemptions for Education

The scope for exemption to apply to education is dependent on a number of factors and these are quite commonly misunderstood. This can lead to errors in VAT accounting due to an organisation either mistakenly believing that its supplies qualify for exemption or more rarely, being unaware that they do.

Regarding exempt supplies, the income generated from the supply is specifically exempted from VAT and it is not possible for the supplier that makes the exempt supply to recover VAT on related costs, subject to certain limits. The education exemption allows supplies by eligible bodies to exempt income from the supply of education, other than for suppliers such as public schools caught by the changes to private education. Where the same type of education is provided by an organisation that is not an eligible body the income is subject to VAT.

The exceptions to this are:

• Private tuition in a subject normally taught in a school or university provided by a sole proprietor or partner;
• Vocational education that is exempt from VAT when provided by a supplier who is not an eligible body, provided that the vocational training is a government-approved training course and is paid for from certain government funds;
• Exam services are also exempt when provided by an organisation that is not an eligible body, as long as they are supplied to either an eligible body or to an individual receiving education or vocational training. That education or training must itself be exempt, non-business or funded through the apprenticeship service account.

In Generic Maths Ltd [2025], the dispute revolved around whether the supply was an exam service that would be exempt from VAT as the supply was to school pupils or a supply of education as the appellant was not an eligible body for the purposes of the education exemption. The appellant supplied an online maths education product which was aimed at school pupils. The product featured many tests that pupils could use to assess their level of maths knowledge and videos that provided teaching.

The appellant argued that the tests contained in its product constituted the ‘making of assessments’. The Tribunal concluded that exemption did not apply in this case because the typical consumer would perceive the product as a ‘teaching product designed to improve the understanding of maths’. Instead, it concluded that the tests and assessments included in the supply were an integral part of a single product designed to increase the understanding of maths.

It should be noted that the appellant had asked HMRC the question of whether exam services were exempt from VAT and had confirmation that they were but had not provided sufficient background information to HMRC for this to be seen to bind HMRC in any way.

The case illustrates why it is sensible to take VAT advice from the outset of making an supply of a new educational product, or simply when supplying educational or training services. It is also necessary for businesses to consider additional legislative changes that  came into effect in January 2025 and impact suppliers of online education to consumers in the EU. Prior to these changes coming into effect, these services had a place of supply where the supplier belonged however under this guidance the place of supply may now be where the customer resides, dependent on the nature of the supply itself. This adds a further complication to what is already a complex area of VAT, reinforcing the need to clarify obligations from the outset.

If you or your client require an initial discussion concerning the VAT implications of your supplies, do not hesitate to contact our free VAT helpline by calling 0161 477 6600 or use our contact form.