A. There are two provisions in the legislation covering Education which come into play here.
Firstly, the provision of education is exempt from VAT when it is by an eligible body (VATA 1994, Schedule 9, Group 6, item 1a).
One of the definitions of an eligible body is a body which provides the teaching of English as a foreign language (Schedule 9, Group 6, Note 1f), which is why the friend’s company is not required to be registered.
Secondly, a supply of private tuition, in a subject ordinarily taught in a school or university, by an individual teacher acting independently of an employer is exempt from VAT (Schedule 9, Group 6, item 2). A teacher acting independently of an employer could be a sole proprietor, a partner in a partnership or a member of a LLP. As your client provides his tuition through a limited company he is not acting independently and therefore the conditions for exemption are not met and the tuition supplied by the company is taxable and once registered will be subject to the standard rate.
If your client would prefer not to be VAT registered he could consider changing the trading entity to meet the conditions for exemption.
