Limited Company client runs a swim school, teaching children. Is this an exempt supply of education?
Exemption from VAT applies to supplies of education by eligible bodies. These are schools, colleges, universities, some non-profit-making organisations, and providers of tuition in English as a foreign language. There is also an exemption for private tuition.
Private tuition means a sole trader or a partner in a partnership, including members of a limited liability partnership, providing education or training in a subject ordinarily taught in a number of schools or universities; this supply would qualify for exemption. However, tuition carried out by employees, or by tutors brought in to deliver classes, is excluded from the private tuition exemption and these supplies are standard rated.
A qualifying subject would be one that is commonly taught in schools or universities, and not one that is purely recreational. The subject would need to be part of school or university education, and the supply, one of tuition, in the sense of a transfer of knowledge or skill in that subject or activity. A number of subjects have been considered by the tribunals; in particular those involving physical activities.
Swimming lessons are commonly part of school education, so have the potential to be exempt.
Where supplies are made by a limited company these are not covered by the exemption. This is because the individual teacher in not acting independently of an employer (the company). HMRC manual VATEDU40500 confirms that the exemption does not apply to supplies made by a limited company.
So, although your client is teaching a subject that is ordinarily taught in a school or university the tuition is not covered by the exemption as it is supplied by a limited company. Your client’s supplies are taxable and when the company reaches the £85,000 threshold it will be required to register for VAT.
Further information can be found in VAT Notice 701/30 Section 6 and HMRC manual VATEDU40000.