The question of whether UK Tutors must pay VAT isn’t straightforward. In this blog we’re sharing some general information with you. Each business and its’ finances are different. Please check your own VAT position with your accountant.
1 VAT BASICS
VAT is a form of sales tax that a VAT registered business charges their clients. The VAT registered business accounts and pays that VAT to HMRC after reclaiming the VAT they pay on their own business expenses.
Businesses must register for VAT when their taxable turnover reaches the VAT threshold. You can check the current threshold here. Like anything else to do with VAT, this can get complicated. HMRC say taxable turnover is, “the total value of everything you sell that is not exempt from VAT.”
This is where it gets interesting, because some tutoring fees are exempt from VAT.
2 SO WHAT TUTORING FEES ARE EXEMPT FROM VAT?
Fees from private tuition MAY be exempt from VAT. This means that those fees don’t count towards a business’ VAT threshold/turnover . So, you don’t have to charge your clients VAT for exempt services.
Tutoring fees are only exempt from VAT IF the fees are paid for
- “For private tuition”
- “In a subject ordinarily taught in a school or university”
- “The tuition is delivered by an individual teacher acting independently of an employer.”
So, tutoring fees are exempt if you meet those criteria.
Let’s break this down:
(a) Private Tuition
This is “tuition given privately by teachers”. This includes one to one as well as one to many in a class.
(b) Tutoring must be “In a subject ordinarily taught in a school or university”.
HMRC will usually start looking at this by asking whether the subject “is one taught regularly in a number of schools or universities”( HMRC’s notice 701/30).
(c) “The tuition is delivered by an individual teacher acting independently of an employer.”
The sessions or lessons must be given by someone who is either
- a sole trader OR
- A member of a partnership. That includes a member of a limited liability partnership.
It means that the exemption doesn’t usually apply to a tutor who is also a Company Director or an employee.
3 WHAT HAPPENS IF?
We did say that VAT is complex. Here are a couple of questions which tutors have asked us. Here’s where it gets tough!
(1) I’m a sole trader. What happens when I’m delivering a session together with a freelancer?
It may be possible to apportion the fees in a “fair and reasonable” way. This would mean calculating what % of the fees are for the tuition which you personally provide. So, for example, the total fees are £80. You teach for 50% of the time. Your fees are £40 and are VAT exempt.
In reality that might be difficult and time consuming. However, if you don’t apportion the fees then you charge VAT on the whole amount (e.g. £80). Definitely one to talk over with your accountant.
(2) I’m a company director – if I provide tutoring personally will that be exempt?
If your limited company is providing the tutoring then it’s not VAT exempt.
It’s possible for you to have a separate business activity as a sole trader tutor. So, for example, you are a primary teacher. Your limited company business activity is selling 11+ and SATS workbooks.
You could have a separate business as a sole trader where you provide tutoring personally. This could be one to one to one or to a class. The tutoring by you through the sole trader business is likely to be VAT exempt if it meets the criteria. So it must still be a ‘subject ordinarily taught in a school or university’. You should talk to your accountant about this.
(3) I’m a tutor agency operating as an Employment Business. I use freelance teacher to provide tutoring. Do I have to charge VAT?
Yes, if the total value of everything you sell meets the current VAT threshold then you must register and charge for VAT. This is because tutoring provided by your employees, workers or freelancers is not VAT exempt.
If you are self-employed or member of a partnership and you are tutoring in a subject that is usually taught in a school or university then your fees are likely to be exempt – but check with your accountant! They are insured for the advice they give you and VAT is business specific – one size does not fit all here.
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