The change to implement VAT on fees for private education came into effect on 1 January 2025 and as a result, many providers are now faced with the daunting obstacle of compiling and submitting their first VAT return with many having a first return ending March 2025 with a due date of 7 May 2025.  

Here at The VAT People, we have found that many providers are struggling to understand HMRC’s guidance. In addition, their own accountants may also be unable to assist with issues such as VAT recovery for costs incurred on capital spend pre-registration and understanding issues such as partial exemption, as not all the services they provide may be subject to VAT.

Common issues we have found private education providers are experiencing:

• Believing that they have to absorb VAT from their income, when in fact their clients may be in a position to pay and recover correctly charged VAT if they are local authorities.
• Assuming all their supplies are subject to VAT when they may be in fact within the scope for health or childcare exemption.
• Applying for VAT registration from an incorrect date and assuming that VAT on costs incurred four years pre-registration would apply when in fact the four years run back from the date that the provider should have registered which was a much later date. This will also block the provider from claiming pre-registration VAT they would have been entitled to recover if the correct date had been used.
• Not understanding how they can use the Capital Goods Scheme to recover significant levels of VAT on building-related costs.

The VAT People have assisted clients to better understand their position and lodge correct claims. We successfully enabled one client in particular to recover VAT incurred pre-registration, thus significantly reducing the impact of accounting for VAT on its income. We also helped another to change the effective date of registration to the correct date to maximise VAT recovery for it.

If you are a private education provider or advisor, please do not hesitate to contact our firm to discuss how we can help you. Call 0161 477 6600 to speak to our knowledgeable team.