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Under UK VAT rules, the supply of education is outside the scope of VAT, as a non-business
activity, if provided without a charge. When a charge is applied, it is exempt from
VAT if provided by certain eligible bodies, usually not-for-profit. This includes
universities, sixth form colleges, further education colleges, and other educational
providers that comply with regulations set by the UK Government.<p> </p>Local Authority
maintained schools, as well as voluntary controlled, community, and foundation schools
are all able to reclaim any VAT incurred on the costs of the provision of education
through a refund scheme provided under section 33B of the VAT Act 1994. This ensures
that the burden of VAT does not otherwise fall on local taxation.<p> </p>Academies
and free schools are also covered by the VAT refund scheme; this is to ensure that
institutions leaving Local Authority control are not at a financial disadvantage due
to their change in status.<p> </p>Sixth form colleges and further education colleges
are not included in the section 33B refund scheme. Like many other providers of public
services, they are expected to cover their VAT costs from their funding allocations,
which include these VAT costs. Sixth form colleges have the choice to restructure
as academies, enabling the recovery of VAT under the refund scheme, but many choose
not to.<p> </p>While the Government keeps all taxes under review, there are no current
plans to change these provisions.
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