Examination services called in to question for VAT

While it is clear that GCSEs and A-levels fall into the category of qualifying examination services as pupils traditionally sit an exam that is formerly assessed and are awarded a grade based on their level of proficiency, in the broader sense, qualifying examination services also include continual assessments, monitoring workplace performance and personal portfolios. All of which seek to record achievements and award a formal recognised qualification.

Generic Maths Limited treated its product ‘ConquerMaths’ as VAT exempt examination services, considering it to be an online assessment led resource, used to evaluate a pupil’s maths ability and identify gaps in knowledge, but not resulting pupils achieving formal qualifications.

The decision focused on how the consumer perceived the product, the majority of the marketing material pointed to it being a teaching service.

It is important that providers consider how their services are viewed through the eyes of a typical consumer.

Whilst it was accepted that the product included diagnostic tests to evaluate learning, it was determined that it was not an examination/assessment service eligible for relief. Education providers offering similar style educational assessments will need to consider the impact of this decision and review the nature of their services. Providers of similar online educational tools need to be certain that they are providing ‘qualifying examination’ services to apply the VAT exemption.

Where the predominant nature of the supply is educational content even where they are providing some element of formal testing to assess knowledge or ability or in the wider sense other types of assessments their supply is likely to be standard rated unless they are a qualifying educational body.

The case is likely to also impact some private schools who may admit pupils based purely on academic ability and set entrance exams to measure ability before offering a place. Historically, a school would be reasonable in treating this as a qualifying examination service and exempt from VAT. However, the question now arises as to whether or not the school entrance exam would meet the criteria of a ‘qualifying examination service’ and so should schools be charging VAT to parents on the sitting of an entrance exam?