Revenue and Customs Brief 09/10 announced their revised policy with regard to the supply of education by a university subsidiary trading company. HMRC have reviewed their policy on the treatment of supplies of education delivered by companies that are owned or controlled by a university, and have concluded that, in many cases where a university trading company provides education, they are acting as a ‘college, institution, school or hall of a university’ and in consequence are ‘eligible bodies’. This means that any education or training provided by the university subsidiary trading company is an exempt supply of education.

University trading companies which have been charging VAT on education and training services to NHS bodies in the past have benefitted from input tax recovery on associated costs. In turn, the VAT charged by these companies to NHS bodies has generally been eligible for recovery by the NHS recipient under the COS provisions.

This change in HMRC’s policy is therefore likely to lead to university trading companies having to increase their charges to NHS customers to take account of the VAT exempt status and therefore irrecoverable VAT on costs.