VAT on education: could providers be entitled to refunds?

Alternative providers of higher and further education may be able to claim refunds of VAT following a recent Court of Appeal ruling, although the position remains subject to further legal proceedings.

HMRC recently published a brief explaining the implications of the Court of Appeal’s decision. The court ruled in favour of the college in question, overturning earlier tribunal decisions and applying principles established in an earlier case concerning fiscal neutrality.

The decision means that some educational supplies made by providers that are not eligible bodies may qualify for exemption from standard-rate VAT. This differs from HMRC’s longstanding policy that education supplied by providers that are not eligible bodies is subject to standard-rate VAT.

HMRC has received permission to appeal to the Supreme Court. In the meantime, alternative providers who believe they are in the same position as the college can submit claims for VAT refunds, pending the outcome of the appeal to the Supreme Court.

HMRC will consider claims individually, taking account of factors including unjust enrichment, partial exemption and whether overdeclared VAT has been correctly accounted for throughout the supply chain. Claims must also reflect any previously recovered input tax, and only the net amount can be claimed. All claims remain subject to normal statutory requirements and time limits.