Updated Post 2018
You need to take care and double check whether VAT needs to be charged when you are providing education and training services.
The rules are very detailed and the VAT rules have been fundamentally changed.
Exemption for VAT on Training Services
The exemption from VAT for training services is restricted to:
A. Certain exempt bodies (see below) who provide:
• Children’s or young people’s education, school or university education;
• Vocational training or retraining; and
• The supply of goods and services incidental thereto (excluding research services)
B Instruction in driving mechanically propelled road vehicles designed or constructed for carriage of
(i) 1.5 tonne of goods or more; or
(ii) more than 9 persons(including the driver).
C Tuition given privately by teachers/sole traders covering school or university education.
D Vocational training or retraining (read more on what qualifies later in this article)
E A body included on a list published by Minister for Justice and Equality to provide courses acceptable for granting an immigration permission;
F A body providing a course leading to an award by an approved college (section 473A Taxes Consolidation Act 1997);
G A provider of a programme of education and training (as defined in Qualifications and Quality Assurance (Education and Training) Act 2012) which is validated under section 45 of the Act;
H A body providing education to children or young persons which if provided by a recognised school (defined section 10 Education Act 1998) would be the curriculum prescribed under section 30 of that Act. Certain children’s summer school activities are exempt.
Recognised schools include pre-schools, primary schools and post-primary schools.
To be exempt from VAT under category A, a training provider will need to fall into one of the categories of exempt bodies.
Exempt Bodies?
The following bodies are exempt from VAT on education and training services at A. above:
• A public body; or
• A recognised school, college or university;
• An education or training provider (as defined in Education and Training Boards Act 2013) to which section 22 of the Act applies (i.e. contracted by a board to do certain work);
• A body in receipt of Exchequer funds
Some Terms
A body includes a company, partnership and an organisation.
A sole trader may be exempt only in limited circumstances of private tuition or vocational training.
If your business training does not fall within the exemptions then the training will be liable to VAT.
Vocational Training or retraining
Vocational training and retraining by a body or a sole trainer will be VAT exempt if it meets certain conditions:
• It must be instruction relating directly to a trade or profession, to improve the ability to carry out work or future employment.
• It must be directed towards an occupation and its associated skills
• Its aim is to improve vocational skills (rather than personal skills)
• The vocational skills can be transferrable to another employment or self-employment
• The training is provided by a structured programme. Has concise aims, objectives and clear anticipated outcomes
• The training must have a clear trainer/trainee relationship
Training provided primarily for the benefit of the organisation rather than the employees (for example management consultancy services) are not VAT exempt as do not fall within the category education services according to Revenue guidance.
Training for recreational purposes (enjoyment and satisfaction for example a non-teacher training yoga class or a short cookery course) or for personal development (for example personal life coach programme) do not qualify as vocational training so are not VAT exempt.
Place of Supply
For Business to Business (B2B) training the place of supply is where the business customer is established.
For Business to Consumer (B2C) training the place of supply is where the supplier is established.
What about electronically supplied services?
Where the training is an electronically supplied service (for example automated distance training) the B2C rules are different because the place of supply is the place where the customer is located.
Conclusion
Based on the new rules it is possible that some training activities of a business will be liable to VAT while other training activities will be exempt.
There is an obligation to register for VAT once the turnover of a business providing services exceeds (or is likely to exceed in a 12 month period) €37,500. A business can also elect to register and charge VAT.
Guidance has been issued by Revenue on how trainers should apply the legislation and to assist you in determining if the training is or is not exempt from VAT.
Have a question on taxation? Please contact us for a consultation.
Disclaimer
The material in this article is for general information purposes only and does not constitute legal or taxation advice. Specific legal and taxation advice should be sought before acting. All information and taxation rules are subject to change without notice.
No liability whatsoever is accepted by M. McLoughlin & Co. for any action taken in reliance on the information in this article