Source · Select Committees · Public Accounts Committee
Recommendation 12
12
The Sixth Form Colleges Association has estimated that the requirement to pay VAT means that...
Conclusion
The Sixth Form Colleges Association has estimated that the requirement to pay VAT means that the average sixth-form college diverts around 4% of its funding away from frontline provision.20 Based on funding data in colleges’ accounts for 2018/19, this would equate to an average of almost £0.5 million per college, or around £20 million per year across all the remaining sixth-form colleges.21
Government Response
Acknowledged
HM Government
Acknowledged
3: PAC conclusion: It is clearly iniquitous that sixth-form colleges have to pay VAT while post- 16 academies and sixth forms do not. 3: PAC recommendation: The Department should work with HM Treasury to assess the merits of making the rules on VAT consistent for schools and colleges. 3.1 The government agrees with the Committee’s recommendation. Target implementation date: August 2021 3.2 State and academy education providers are typically engaged in ‘non-business’ activity as there is no charge for the education provided – this means there is no taxable supply made and value added tax (VAT) is not chargeable. Most of these said providers are covered by the Education Act 2011. 3.3 The meaning of ‘business’ is concerned with making supplies to other persons for any form of payment or consideration. Educational suppliers who engage in the provision of education (for example, higher or further education) for a charge are deemed to be ‘in business’ for VAT purposes - the sales of goods and services are taxed in the normal way. Education providers must register for VAT, if the taxable supplies go beyond the VAT threshold, in a similar manner as other businesses. 3.4 The department’s Tax and Expenses Team will engage with its Customer Relationship Manager at Her Majesty’s Revenue and Customs (HMRC) to explore the potential routes and efficacy of taking forward the Committee’s recommendation. The department will also engage HMRC/HM Treasury (HMT) to gauge ministers’ appetite for changing or implementing legislation to level-up across the education provider base.