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Originally Posted On: https://thevatconsultancy.com/vat-education-training-coaching-counselling/

VAT Treatment of Education, Training Courses, Coaching, Counselling and Online Content

We are frequently asked to advise businesses on the VAT treatment of services involving training courses, education, coaching, counselling and online content.  Often our clients provide a combination of these services to both UK and overseas clients and to a mixture of B2B and B2C clients.  This can be a complex area of VAT as it is necessary to determine exactly what is being provided to whom – this is because there are a number of VAT rules that can apply, each potentially giving a different outcome when applied in terms of VAT treatment.   The position is made more complex with the addition of an overseas angle in the form of overseas customers or physical events taking place overseas.

During Covid many businesses providing educational or training type services face to face were forced to move their business online pretty much overnight, and this brought with it a change in the VAT rules applying to the activities.  Post pandemic many of these businesses have retained an online offering in addition to ramping up face to face offerings again.  Online offerings also mean that the business may have overseas clients for the first time.

In this article we will set out the VAT treatment applying to education courses, training and coaching services in addition to the provision of online content.   The rules set out are those applying in the UK and generally in the EU, although fine detail may vary within the various EU Member States.

B2B versus B2C

Before diving into the specific VAT rules applying to the type of service provided, you need to work out whether you have ‘business’ (B2B) or ‘private individual’ (B2C) clients:

B2B

Generally, where a customer can provide you with their VAT registration number, they are deemed to be in business provided the services are supplied for the purposes of their business rather than for private use.  Alternatively, if a customer cannot provide a VAT registration number, it is possible to accept alternative evidence of business status, for example, a certificate from a fiscal authority or other commercial document indicating the nature of the customer’s activities in their home country.  Where alternative evidence is relied upon, it is best practice to retain this evidence as part of your records to substantiate why UK VAT has not been charged on the supply – this can be a high risk area as education and training type services are frequently provided to organisations where the business status is not clear and the organisation falls into a grey area between the two categories.

B2C

Generally, B2C include supplies made to a:

• Private individual;
• Charity, government department or other body that has no business activities (eg it only has statutory/not for profit activities); or
• Person (natural or legal) who receives a supply of services wholly for a private purpose.

VAT Treatment of Education, Training and Coaching

To determine the appropriate VAT treatment of the services you need to know:

• The location of the trainer/teacher
• The location of the ‘student’
• Whether the session/event is live or recorded
• Whether the session in physical or virtual

Live Online Sessions

Education and training courses or webinars where the session is delivered live by a teacher over the internet or an electronic network are subject to the ‘general VAT rule’ for services, meaning the following applies:

• B2B services are subject to VAT where the business customer is located (so if they are in the same country as the business supplying the services eg UK, the supplier charges UK VAT. If they are overseas, the customer would typically self assess reverse charge VAT and the supplier does not charge UK VAT;
• In the UK and EU, B2C services are subject to VAT where the supplier is established so they charge local VAT regardless of where the customer is located.

Pre-recorded Online Sessions

An online course consisting of pre-recorded videos and downloadable PDFs falls under the definition of a ‘digital service’.  Webinars that are not live, for example webinars that can be downloaded and delivered electronically with no human interaction, also fall within the definition of a digital service.  A key aspect of a digital service for VAT purposes is that it can be accessed without human interaction, for example where you click a link, and the content is automatically downloaded etc.

The VAT rules applying to digital services are slightly different to those above for ‘live’ events:

• B2B services are subject to VAT where the business customer is located (so if they are in the same country as the business supplying the services eg UK, the supplier charged VAT. If they are overseas, they would typically self-assess reverse charge VAT and the supplier does not charge VAT;
• B2C services are subject to VAT where the customer is located (usually the place of residence). However, this is overridden by the ‘use and enjoyment rules’ which mean e.g. if the supplier is in the UK and the customer is overseas, UK VAT is not charged unless the services are used and enjoyed in the UK (so if a session is downloaded and enjoyed when the customer is in the UK e.g. on holiday).  Crucially, where the services are provided to an overseas customer, the supplier may require an overseas VAT registration (see OSS rules below)

NB an online course consisting of pre-recorded videos and downloadable PDFs plus support from a live tutor do not fall under the definition of a digital services and instead are taxed under the general VAT rule – the presence of the live tutor, available to answer questions etc changes the nature of the service, even if the live tutor would arguably be seen as being incidental to the overall online course content.

Physical Training Courses

Where a training session takes place face to face, it is a ‘general VAT rule’ service for B2B customers (so subject to VAT where the customer is established, with the supplier charging VAT if in the same country as the customer).  For B2C, the revenue is subject to VAT where the training is ‘performed’ so where it physically takes place.  The supplier may be required to register for VAT overseas in this case.

Live In-Person Events

Where a business runs events and charges delegates an entrance fee, VAT is due on this fee at the VAT rate applying where the event physically takes place.  This means an overseas VAT registration may be required in the country in question if the event takes place outside the supplier’s country.  The registration would also be used to declare VAT on other ad hoc charges subject to local VAT eg charges for gala dinners or specialist breakout sessions.  NB sponsorship would not be subject to overseas VAT but would be taxed where the business is established.  As above, if the event is run by a not for profit entity, VAT exemption may apply as set out below.

Coaching and Counselling Services

Where the sessions are aimed at improving working practices within a workplace or supporting an individual with a particular issue, rather than being an ‘off the shelf’ training session that is relatively generic in nature, they are regarded as being ‘advisory’ in nature and are therefore taxed as follows (regardless of whether face to face or online):

• B2B – general VAT rule, so subject to VAT where the customer is established (with the supplier charging VAT if in the same country as the customer)
• B2C – subject to VAT where the customer is resident (so no UK VAT if outside the UK)

VAT Exemption for Education

Certain educational services provided by an ‘eligible body’ are exempt from UK VAT, even if they would be subject to UK VAT based on the rules above (eg if supplier and customer are both in the UK).  However, to qualify as exempt the education services should either be provided by an eligible body (meaning they are a not-for-profit organisation eg a school, university etc), be provided by a self-employed teacher or coach, or fall under the English as a Foreign Language (“EFL”) provisions.    For the VAT exemption to apply, the subject being taught should be one ordinarily taught in a traditional educational setting (eg a school/college/university).  VAT exemption can also apply to large events/symposia run by eligible bodies if the content is geared towards educating/training the delegates.

UK VAT Treatment of Digital Publications

From May 2020, certain electronic publications are now eligible for the zero rate of VAT.  Examples include e-books, e-magazines, e-journals, and e-periodicals.  However, HMRC guidance stipulates that where more than half of an e-publication is devoted to advertising, audio or video content, it  will be standard rated for VAT purposes.  HMRC give the example of an auction house selling e-brochures containing information about lots in a forthcoming auction, stating that since the e-brochure is predominantly advertising, its sale is standard rated.  NB this VAT rate does not apply to online content databases generally, eg a subscription to an online resource with search functions where the information is not also available in hard copy printed format.

Single versus Multiple Supply

Where customers are provided with more than one service for the price they pay/a subscription, it is necessary to determine whether there is i) a ‘single supply’ with ancillary elements, or ii) a mixed supply where each element is of equal importance.   This is a fundamental test relevant in many areas of VAT and it is frequently seen with businesses providing online/live training events with the session being available online afterwards, so that customers can refer back to the content afterwards or so that anyone missing the live session can review the online copy.  In such a case, it is likely that this would be regarded as a ‘single supply’ of a live event (so subject to the general VAT rule as above), with an ancillary element (online pre-recorded content) which is a ‘digital service’.  This ancillary element effectively loses its own identity for VAT purposes and takes on that of the primary service, in this case the ‘live’ event.

If however there were options for the customer whereby they could for example simply subscribe for the online content, without being able to attend the live sessions, the revenue for this would be digital services revenue, taxed as set out above.

B2C Digital Services – Overseas VAT Registration Requirements

OSS Simplification

As set out above, if a business has B2C digital services revenue, it may be required to register for VAT overseas.  If the business supplies digital services to B2C customers in the EU they will be required to VAT register under the One Stop Shop ‘OSS’ system to account for VAT at the VAT rate applying in the country of the EU customer, eg 25% for Denmark etc.  OSS VAT returns are filed quarterly, and a single payment is made to the tax authority of the country owning the OSS VAT registration.  This EU country then passes on the VAT amounts to the relevant country.  Other non-EU countries have similar rules.  The VAT Consultancy can assist you by helping determine whether you need a VAT registration in a non-EU country.

OSS – Impact on Pricing

As the OSS scheme requires you to account for VAT at the rate applying in your B2C customer’s country, depending on how your B2C website for content would show pricing (it is commonplace to have a single VAT inclusive price), you may want to consider the impact of the varying VAT rates within the EU on the price that is shown initially to the customer.  The VAT rates vary between 17% and 27% in the EU Member States.  If you add the VAT amount at website checkout, this could deter consumers from proceeding with the purchase.  If you show VAT inclusive pricing, you will need to consider which rate you use to arrive at the value – e.g. the average rate, the rate at which where you expect to generate most sales, the highest rate to maximise profits etc.    There is no requirement to provide a VAT invoice to customers who are consumers.

Summary

The VAT treatment of education, coaching, counselling, training courses and online content services is complex, so care must be taken to determine the appropriate VAT treatment of the activities, particularly where there are overseas attendees.  The following table summarises the above:

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