Pressure builds on government to block VAT tax break for private education providers

12 December 2012 | last updated: 11 December 2015

UCU and the National Union of Students (NUS) have today written to the minister for universities and science, David Willetts, asking him to block any moves to grant for-profit providers of education exemption from VAT.

In a public statement* also issued today, the organisations argue that VAT exemption should not be granted to companies whose primary mission is to reward shareholders rather than the provision of education. Under current rules, universities and colleges are exempt from paying on education services they provide because of their not-for-profit status.

Last week UCU wrote to the Public Accounts Committee asking it to investigate new revelations that private colleges now receive over £100m of public money, despite the fact that they are not subject to the same regulation as public universities. Private providers do not have to observe controls on the number of students they recruit, nor do they have to provide information about completion rates.

UCU general secretary, Sally Hunt, said: 'The government must not allow companies seeking to make profit out of higher education access to a VAT tax break. Talk of achieving a level playing field is nonsense when for-profits will enjoy a tax break on top of their ability to raise capital from the markets. This could well lead to established universities struggling to compete for market share and possibly being bought out completely. This is no way to preserve our established global reputation for excellence.'

NUS president, Liam Burns, said: 'There is no evidence to suggest that this proposed VAT tax break will benefit either students or taxpayers, and much to suggest that it will give an unwarranted advantage to those who put profit before students. HMRC should now withdraw its proposals and instead consider an appropriate corporate taxation band to ensure that profit-making education companies pay their fair share.'

* VAT exemption statement

As organisations representing staff and students in higher education, we are deeply concerned at government proposals to grant a tax break to for-profit companies that offer higher education by allowing them the same exemption from paying VAT as charities and not-for-profit companies.

Under current rules, universities and colleges are exempt from paying VAT on the education service they provide because of their not-for-profit status. This ensures that those benefiting from exemption from paying VAT are investing resources in front-line services for students rather than passing profits on to their shareholders.

Ministers claim to want to create a level playing field for new providers, but this measure moves in the opposite direction. It erodes the vital distinction between those institutions whose primary mission is the provision of education and those whose primary mission is to reward shareholders. It grants tax relief to for-profit companies at a time when corporate tax avoidance is a potent public concern and will rig the higher education market in favour of those providers with access to private capital, ensuring that students' fees and public subsidies are used to create corporate and individual shareholder profit.

We call on the government to withdraw its proposed extension of VAT exemption to for-profit providers of higher education.

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