The uncertain VAT treatment of education in the UK

As of 1 January 2025, the government has imposed VAT on supplies of education by private schools. This policy, which the government successfully defended at the High Court last week, marks a considerable change for affected operators. Many schools are still working through all the implications of this change in liability as the complexity, and cost, of their new responsibilities becomes clear. However, the changes in the sector are not limited to private schools and two recent cases could affect university colleges and private tuition providers.

Solent Pathway Campus Ltd (SPCL) is a private provider of education focused on preparing overseas students for university in the UK. SPCL considered itself a college of a UK university and, in line with the Supreme Court decision in SAE Education, treated its income as exempt from VAT. However, HMRC disputed this position, and the matter was brought before the tribunal. While the tribunal ultimately found in favour of SPCL, recognising it as a college of the university, the case demonstrated the difficulty in applying the law and, consequently, the potential for HMRC challenges even in seemingly straightforward situations.

The second case, Rushby Dance and Fitness Centre & Ors, concerns the VAT liability of private tuition. Supplies of tuition in subjects ordinarily taught in schools are exempt from VAT. However, HMRC argued that the tutors' dance lessons did not fall under this exemption. The tribunal rejected the argument that a broad range of dance styles could be treated as equivalent to general school-based dance education and sided with HMRC. It found that Ballroom, Latin and Kettlercise dance styles are not ordinarily taught in schools. Thus, VAT must be charged to pupils on these lessons. 

These cases highlight the increasingly uncertain tax treatment of education in the UK. Education providers must now carefully consider how changes in VAT law and the courts’ recent decisions affect their supplies for VAT purposes. Failure to do so could result in additional financial burdens.

The landscape of VAT treatment in education is no longer as clear-cut as it once was. Providers must stay informed and adapt to these changes to avoid HMRC action.