Commentary

V6.219 VAT recovery and other practical points for the education sector

Part V6 Business by business

V6.219 VAT recovery and other practical points for the education sector

V6.219 VAT recovery and other practical points for the education sector

VAT recovery in the education sector

Partial exemption

As described at V6.218 the education sector may have a combination of exempt and taxable activities. As a result it is common for organisations in the sector (particularly universities, HEIs and FE colleges) to be partly exempt and to have some restriction in their VAT recovery entitlement. Partial exemption is covered in detail in V3.460–V3.470.

Many commercial providers of education will only make taxable supplies and will therefore normally be unaffected by partial exemption.

VAT attributable to non-business activities

In addition to issues of partial exemption, V6.218 highlights that some education providers will have non-business activities. VAT is generally only recoverable to the extent that it is used for a business purpose. Therefore VAT which supports non-business activities will normally be irrecoverable. Input tax recovery and business purposes are covered in V3.405A–V3.410. For principles of apportionment where goods and services are to be used for both business and non-business purposes, see in particular V3.408.

Although VAT is generally irrecoverable when incurred for non-business purposes, special arrangements apply for certain types of organisations including statutory authorities and academies as described in V5.162 and V5.162C respectively. See also 'VAT recovery for local authority schools' below.

VAT recovery for universities and Higher Education Institutions (HEIs)

Whilst HMRC has, in the past, allowed higher education institutions to use partial exemption methods based on the standard method but with the exclusion of centrally funded grant income from the calculations, it subsequently

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