Q: When two of my clients retired from teaching in schools they set up a partnership to deliver tuition for GCSE Maths and English. They each tutor their own individual students, as well as delivering tuition to a group, but most of the time they use third-party teachers to take the group sessions. Their turnover is £140,000 looking back over the last 12 months but they are not VAT registered as they believe their services are all exempt; is this correct?
A. Where a sole trader or a partner in a partnership teaches a subject ordinarily taught in schools or universities, this is an exempt supply of private tuition. As your client is a partnership and the partners are teaching normal curriculum subjects then their tuition will be an exempt supply. HMRC’s manual VATEDU40200 confirms that supplies are still exempt even if the partnership:
- Delivers the classes to a group;
- Contracts with an individual or organization that makes an onward supply of educational services, or
- Works under a franchise agreement that allows him or her to use the teaching methods, name or trading style of another person or organization.
As the partnership engages other teachers to deliver some of the tuition, that element of their turnover will be standard rated. Your client will need to keep records sufficient to identify the level of exempt sales of partner tuition and taxable sales of tuition carried out by others.
Any goods or services supplied in the course of private tuition will be standard rated, unless there is a specific relief, for example, a sale of books in printed format, which would be zero-rated.
The partnership is making both exempt and taxable supplies, but they will only be looking at the taxable turnover when deciding whether they should be registered for VAT. If the total standard and zero-rated income have not exceeded the £85,000 threshold then there is no requirement to register unless they choose to do so voluntarily. If their taxable turnover exceeds the registration threshold then this will be a compulsory registration and they will be partially exempt going forward.
This table will help to decide whether the private tuition supplied by an individual teacher, working in a personal capacity, is exempt from VAT.
|If the teacher is||and||then|
|a sole proprietor or member of a partnership||the subject is one taught regularly in a number of schools or universities
takes on a teacher or teachers to help in carrying out the instruction
|it’s an exempt supply of private tuition
even though the tuition delivered by the teacher (as sole proprietor or partner) may still qualify as exempt private tuition, the tuition that others deliver is standard-rated
If a teacher takes on another teacher (or several others) to assist, either:
- there should be an apportionment of supplies of tuition between exempt and taxable elements (using any fair and reasonable method)
- all supplies of tuition should be treated as taxable regardless of who actually delivers it
For the VAT threshold, only the sales from sub-contractors’ work will be counted towards the VAT threshold.
There is no exemption under the limited company, you will have to charge & pay VAT.
For further information, please see VAT Notice 701/30 (section 6) and VATEDU40000.