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Supreme Court confirms that commercial education providers can provide VAT exempt university education

  • United Kingdom
  • Tax planning and consultancy
  • Education


On 20 March 2019, the Supreme Court handed down its judgment in the case of SAE Education Limited v Commissioners for Her Majesty’s Revenue and Customs [2019] UKSC 14. The Supreme Court has decided unanimously that a commercial provider of university education can benefit from the VAT exemption as a “college of a university” where the provider’s activities are integrated into those of the university.

HMRC has strongly resisted many commercial providers of education from benefitting from the VAT exemption. But the Supreme Court’s decision has recognised the policy objective of the VAT exemption so as to ensure that VAT costs do not act as a barrier to students gaining access to higher education. The Supreme Court stated that, in order to assess whether the VAT exemption applies, one must consider if a provider’s educational activities are so integrated with those of its related university, that it may be properly inferred that it has the same constitutional objects as that university. Though each case will turn on its facts, the following points are relevant for establishing whether or not the VAT exemption will apply:

1. the entity (which may be profit making) must provide education

2. the entity must be connected with a UK university such that it could be considered a college of that university, though it does not need to be connected structurally or constitutionally to the university

3.the context and characteristics of the educational services provided by the entity are key to determining if there is a relationship with the university, and if they are so aligned, then it could be said to be integrated with that university

From a practical perspective, the Supreme Court stated that there are five key questions that should be asked that would indicate that a higher education provider factually sits within the exemption: i) is there a common understanding that the entity is a college of the university; ii) can the entity enrol students as students of the university; iii) are those students generally treated as students of the university; iv) can the entity provide courses approved by the university; and v) can the entity present its students for examination for a degree from the university? Though each case will turn on its own facts, there is no hard and fast rule that can be applied, this decision provides some welcome clarity for commercial profit-making higher education providers.

Based on this judgment, there may be opportunities to challenge any VAT assessments made by HMRC or to make retrospective VAT claims, if VAT has been charged in the past. We would be delighted to speak to you in more detail about the implications of this case.

A full text of the judgment can be found here.