Potential UK VAT exemption on remote education delivered overseas
Background
St. George’s University (SGU) is a university based in Grenada that provides education and vocational training to students through partnerships with UK based universities. The decision of their First Tier Tribunal against HMRC could have implications on UK schools delivering remote education overseas.
HMRC sought to apply UK VAT to the fees paid for the education on the basis that:
- SGU was the entity making supplies to its students
- SGU is not an eligible body (a requirement for a UK based entity to apply the educational exemption); and
- Whilst SGU organised the courses in Grenada, the place of supply was the UK being where the UK universities are situated and where the students received education.
The decision
Despite agreeing with HMRC in respect of points one and two above (the course was delivered by SGU to students and it was not an eligible body). However, the First Tier Tribunal ultimately found in favour of SGU. It found that VAT was not due on the fees because it considered that the place of supply was in Grenada as that was SGU’s place of establishment and that was where the courses are organised. Consequently, the supplies are ‘outside the scope’ of UK VAT.
Applications to UK schools delivering courses abroad
This decision could support UK schools in applying for UK exemption to school fees that are organised by them even if the education itself was to take place outside of the UK.
In particular, this could be useful where, due to the recent constraints, education is delivered live but remotely by video link to students who are based abroad. This is because, the supply of tuition in schools like in SGU’s case would also be treated as a ‘single supply of education’ and so it would be the place where the tuition is organised which is important when looking at where to tax the supply for VAT purposes.
Generic pre-recorded classes
Please note however that the decision would not apply to pre-recorded lessons that are delivered without any human interaction (e.g. individual tutoring/mentoring). In these instances schools should note that VAT could fall due in multiple countries as the supply can be taxed where the content is downloaded. This can lead to multiple VAT and sales tax registrations being required which increases administrative costs as well as the potential for additional VAT/sales tax burdens.
It is also worth noting that ‘eligible body’ status in the UK which allows for exemption to apply to education will often not apply to a UK school delivering education in another jurisdiction. Therefore, case should be taken by schools packaging courses that offer no individual tuition or mentoring and can be downloaded anywhere in the world.
For further information please get in contact with Kieran Smith, Robert Warne or your usual Crowe VAT contact.
