Fighting together for USS

Budget blocks VAT tax break for private education providers

20 March 2013 | last updated: 10 December 2015

UCU today cautiously welcomed news in the budget that the government has decided against allowing for-profit providers of higher education VAT exemption.

UCU led the campaign against the move and wrote 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.

The union argued that VAT exemption should not be granted to companies whose primary mission is to reward shareholders, rather than the provision of education. The union's concerns were shared by the business, innovation and skills committee, who repeatedly questioned ministers on how a VAT cut for for-profit companies would affect the health of the sector.

Under current rules, universities and colleges are exempt from paying VAT on education services they provide because of their not-for-profit status. Today's budget suggests that privilege will not be extended to for-profit education providers*.

UCU general secretary, Sally Hunt, said: 'The government must not allow companies seeking to make profit out of higher education access to a VAT break and we are pleased today's budget appears to back our call.

'We don't doubt people looking to make a quick buck out of our higher education system will continue to circle the sector, but giving them tax breaks does not create a level-playing field as some have argued. Any tax breaks, on top of their ability to raise capital from the markets, could lead to established universities being undercut by for-profits delivering only courses likely to make them money.'

* 2.183 VAT: extension of the education exemption to for-profit providers of higher education - At Budget 2012 the Government announced a review of the VAT treatment of university degree level education. Responses to the subsequent consultation on whether to extend the existing exemption to commercial entities supplying such education identified a number of issues with the options proposed. The Government has listened to those who have responded and as a result will look to develop alternative options, including possible changes to the exemption for further education and will consult on these later in the year.