Finance Act 2015, VAT exemption for educational services and the curious incident of the Revenue Tax and Duty Manual, Education and Vocational Training

Friday, September 15, 2017

by Nick Ryan

With the release of FB 2015 and its enactment as FA 2015 the most notable comment by a plethora of practitioners was to signal the deathknell for the application of the exemption for private sector vocational training providers.
Following this Revenue both promised an updated guidance document to explain the changes and their implementation and, at the same time, continued to reiterate that the exemption for vocational training remained in place for those operators whose services had qualified for the exemption pre 1 January 2016.
Was this what we saw on the ground, not exactly, some Revenue districts looked to bring private sector vocational training providers into the VAT net as soon as possible, many vocational training providers followed the clear signals from the tax commentators and registered for VAT immediately signalling an uncompetitive disadvantage with the public sector organisations to which the recognised body status clearly supported. Others looked for assistance, or played the waiting game, waiting for the promised guidance.
Looking at the legislation it was abundantly clear that the change intended to apply the ECJ rulings and push all categories of education, whether it be young people’s, third level or vocational, into the exemption only if the services are provided by a recognised body. The amended Para (3)(4) stated:
“The provision by a recognised body of children’s or young people’s, school or university education, or vocational training or retraining (including the supply of goods and services incidental to that provision…”
Looking at this Paragraph, it is one sentence with each element grammatically correct as broken by a comma to clearly identify its inclusion within the meaning of the sentence. Therefore we should understand this to clearly state that only education services provided by a recognised body is provided for under the exemption. To conclude from this amended paragraph that the position regarding recognised bodies only applied to all the elements other than vocational training and retraining could only be considered where the sentence to state, as it clearly does for the instruction in the driving of motorised road vehicles, vocational training and retraining are excluded from the provision by a recognised body.
Pretty clear, so what is my concern.
Revenue finally released its guidance document under Revenue E-brief 37/17 in April 2017. The guidance document made one dramatic announcement in its introduction that, under Note 1, where a provider of vocational training meets all the specific conditions under paragraph 4.1 then the services they provide qualify as exempt educational services and there is no requirement that the provider be a recognised body.
This is a clear contradiction of the legislation as amended under FA 2015 which clearly states under para. (3)(4) that vocational training only qualifies for the exemption if provided by a recognised body.
What does this imply. and what takes precedence, the legislation or a Revenue guidance note? Admittedly tax practitioners and accountants all welcomed this revised understanding on behalf of our private sector vocational training providers but, what if the Revenue guidance had provided for a detrimental interpretation of the legislation, would we all be as silent as we are for this?

I might be reading this incorrectly but the amended legislation as enacted clearly states that a provider of vocational training has to be a recognised body whereas the Revenue Commissioners’, the representatives of the enforcement of this legislation, are stating that this is not the case.
My concerns are twofold, firstly is this not a bold rebuttal of the reflection of the judgements of the Court of Justice of the European Union which had ruled on Ireland’s over extension of the application of the exemption. Secondly, is this not setting a precedent for Revenue to “interpret” a piece of legislation to manage its needs and, does this not provide for a concern. What happens if Revenue release a revised Leaflet on the Place of Supply of Services which decides to interpret the Business to Business General Rule as only applying to Limited Company’s!
In my time in VAT, as an officer in HMRC, working for the big 4 and, under our own practice, the given in providing advice is to look to the legislation, this determines whether you are right or wrong, this leads to questions on application, this is where Revenue provide its reliance in defending its actions.
The current legislation under para (3)(4) is quite clear, a provider of vocational training is exempt where it is a recognised body. Yet the position explained in Revenue’s manual, issued some 16 months later, states the contrary.
Am I complaining where this step back has assisted many of my clients in retaining the status quo with their public sector competitors? No.
Am I concerned over the costs, some significant, both financial and personal, that some private sector businesses incurred following the release of FB 2015 and its enactment? Yes.
Am I concerned that Revenue, or the Government, has over-stepped its right in enforcing the law? Yes.
For those private sector vocational training operators, normality has returned but my primary concern is where this apparent contradiction of the application of a piece of legislation will lead to next.
Should you have any questions on the above, have a case you wish to discuss or, require guidance on VAT issues ten please contact Nicholas Ryan by telephone, +353 2388 38181, or email,

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