Finance Act 2015: VAT exemption for educational services

Friday, March 11, 2016

by Nick Ryan

Three years ago Revenue published e-brief 22/2012 in order to provide further clarification of the application of the exemption for providers of educational services. At that time, our view was that it fell short in clarifying the position on vocational training services.
Since then, we have worked with a number of educational providers in a variety of educational sectors and, where in all cases, the application of the exemption has been questioned by Revenue. The common factor in these cases is the variance of opinion from Revenue on whether the services are educational, the basis of provision of the services and, status of the person providing the services that determines whether the services qualify for the exemption. In some instances, we have witnessed distinct and conflicting views on the same educational service; notably in the vocational training sector.
At that time, we expressed our view as to the difference in the legislation provided for by the UK and Ireland and expressed our concern that the Irish legislation fell short on the detail.
The changes introduced by the Finance Act 2015 do provide for greater clarity and we now have greater detail on what constitutes an educational provider or, recognised body.
Am I pleased with the changes? Let’s just say my outlook is mixed.
My concern is the void that they have created between pre FA 2015 and post. You may note that Revenue’s Leaflet remains as it is but for the fact that it now confirms it is “Pre FA 2015”. Revenue provide no comment, guidance or proposal for managing any transitional changes required for those educational providers that qualified for the exemption pre FA 2015 and may now not do so. Nor is there any clarity as to whether the exemption remains in place for those private sector providers that cannot place themselves within the “recognised bodies” list.
The list of recognised bodies does provide some hope for private sector providers but, there is a need to tread with care in interpreting whether a business does qualify. Revenue has clearly signalled that the crossover to the revised legislation will need to be considered on a case by case basis. The list does though clearly highlight Revenue’s attempts to limit the extension of the exemption and one would expect Revenue to take appropriate steps to enforce this limiting through its enquiries and audit functions. The primary focus of these revisions is to limit the extension of the exemption within the private sector particularly within the vocational training sector, and where the training is provided outside of a class room setting. The further concern is how Revenue interpret “class room setting” and whether this provides for an opportunity to apply pressure on vocational training conference organisers/providers.
The additional clarification we have sought from Revenue for our clients has already highlighted a variance of understanding by Revenue as to the application of the changes and the impact on those businesses already applying the exemption. In some cases, Revenue confirms that the exemption will continue to apply irrespective of the changes while, in other cases the opposite view is being taken.
Following the announcement of the changes we now note Revenue’s first series of enquiries to some vocational education providers and it appears the stance being taken is to remove those providers from the exemption.
So, what steps should be taken? A Revenue ruling does not carry the same weight it had before the Code of Practice became its bible and, a written response from one Revenue District can still be challenged by another so, where does the value lie? The technical expertise in Revenue, the Revenue Legislation Services, does not engage directly with the tax payer or their agent. Revenue Technical Services are also difficult to approach directly and will look to pass the query to a local Revenue District where possible.
Bearing this in mind, the primary need is for a business to establish whether the educational services they provide fall within the meaning of the exemption and, where there is any element of doubt, then an approach to Revenue will need t be made.
The VAT Practice is working with a number of educational service providers covering a broad spectrum of the industry and, with our knowledge and expertise, can assist businesses in determining whether the activities and services they provide qualify for the exemption.
Should you require further information on this or, wish to discuss a specific case then please contact Nick Ryan at the VAT Practice by email, or by telephone, 0238838181.

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