Whether training carries VAT depends almost entirely on who supplies it. The same course is exempt from an eligible body and standard-rated from a commercial provider. And since 1 January 2025 private schools are standard-rated despite being eligible bodies — the one place where that logic breaks.
The eligible body test
Everything turns on this. An eligible body includes:
- Schools, sixth form colleges, tertiary colleges, further education colleges and centrally funded higher education institutions;
- Governing bodies that are local authorities, government departments, or non-profit bodies carrying out public duties;
- Universities and higher education providers in the approved fee-cap category;
- Non-profit organisations meeting the conditions — the test being an organisation that "cannot and does not distribute any profit it makes";
- Commercial providers of English as a foreign language tuition, which have their own special rules.
The non-profit limb is the one most often argued over, and note how strict it is: the organisation must be unable to distribute profit, not merely choose not to. A company limited by shares that reinvests everything is not an eligible body; its constitution permits distribution.
The liability
Three outcomes:
Eligible bodies other than private schools — supplies of education and vocational training are exempt.
Private schools — standard-rated at 20% from 1 January 2025. This is the deliberate exception introduced by the government's policy change, and it sits oddly inside a structure otherwise built around eligible body status. Our guide to VAT on private schools covers it in detail.
Everyone else — standard-rated, unless the supply qualifies as private tuition or as examination services.
For a commercial training business, that third line is the whole answer: your courses carry VAT. The upside, easily forgotten when a client complains about it, is that standard-rating means full input tax recovery on venues, materials, trainers and marketing — where an exempt provider recovers none of it.
Private tuition
A genuine exemption exists for individuals, and its boundaries are precise. Private tuition by a sole proprietor or a partner is exempt where the subject is "one taught regularly in a number of schools or universities".
Two limits follow. The subject test is objective — it is about whether the subject is commonly taught in the education system, not whether the tuition is educational in character. And the moment the teacher "takes on a teacher or teachers", tuition delivered by those employees becomes standard-rated, requiring apportionment or treating all supplies as taxable.
That second point catches growing tutoring businesses squarely. A sole tutor is exempt; the same person with two employed tutors has a mixed or wholly taxable business, and the transition is a registration and pricing event rather than a technicality.
Closely related goods and services
Where an eligible body makes an exempt supply of education, certain associated supplies follow it into exemption. The test is that they are "for the direct use of the pupil, student or trainee" and "necessary for delivering the education".
Exempt as closely related, when supplied by an eligible body: accommodation — except private school boarding — catering, transport, and school trips.
Expressly not closely related: supplies of staff, shop sales, uniforms, admission charges, and commission for allowing sales by outside organisations. Those keep their own liability.
The distinction is worth applying carefully in a college or university, because the two sides sit on the same campus and often in the same cost centre. A refectory serving students is on one side of the line; a uniform shop is on the other.
Government-funded vocational training
There is a separate route to exemption that does not depend on eligible body status, and commercial training providers frequently overlook it.
Exemption applies to vocational training delivered under one of the funded schemes — Department for Education funding, an apprenticeship service account, or European Social Fund money — but only "to the extent that they're ultimately funded by the government".
The words "to the extent" carry the work. Where trainees or employers fund part of the cost, apportionment is required. So a commercial provider delivering an apprenticeship standard part-funded through a levy account and part-funded by employer co-investment has a partly exempt supply, not a wholly exempt one — and that in turn creates a partial exemption calculation on input tax.
This is the single most common error we see in training businesses: treating a government-funded programme as wholly exempt, recovering no input tax on it, and never apportioning the employer contribution. Our guide to the apprenticeship levy covers the funding mechanics.
Where this leaves a training business
Four questions, in order.
Are you an eligible body? If the constitution permits profit distribution, you are not — and no amount of reinvestment changes it.
Is any of the delivery government-funded? If so, identify the funded proportion and apportion, rather than treating the programme as exempt or taxable in its entirety.
Are you relying on private tuition? Then check both limbs: the subject test, and whether anyone other than a principal delivers the teaching.
Have you separated the closely related supplies? Catering, accommodation and transport follow the education; staff, uniforms and shop sales do not.
One thing this guide deliberately does not cover: the place of supply rules for training delivered across borders, including the distinction between live online delivery and pre-recorded content. Those turn on rules we have not set out here, and a provider selling internationally should take advice on them specifically rather than assume the UK liability travels.
Acumon advises education providers and commercial training businesses through VAT planning, VAT compliance and partial exemption work, with education audit for colleges and academy trusts. If you deliver a part-funded apprenticeship and treat the whole programme as exempt, that is the apportionment to revisit first.