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Live online courses in UK - VAT exempt or not?

Trying to determine the treatment of live online courses (B2C in the UK) for the purpose of VAT

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I am a small business delivering online photography courses to customers ( predominantly in the UK). The courses have a strong live component ( delivered by myself and other subcontracting instructors in live online sessions, supported by material published on a private site). I had previously been led to believe that this live delivery meant that my courses were VAT exempt. My previous turnover positioned me below the threshold so I hadn't investigated it fully, but as the business grew, we're now hitting that line.  But when I approached a couple of recommended accountants, I was given two different interpretations of what the services I render actually fall under and whether or not I may be exempt.

I now believe that the 'live component' element applies to services rendered to customers outside of the UK. 

But what I've not been able to determine, is whether the services rendered within the UK are Education? ( I am not an eligible body, unless education provided by sole proprietor counts?)  or digital services? ( although my services are not a provision of ready to go documents, but tailored advice in online group setting)? 

And given the above, I don't know whether they should be VAT exempt or not? 

The two accountants I spoke with have opposing views on this and I really don't want to fall foul of the regulations, but I also don't want to go into VAT unless I actually need to. 

Any advice on this, suggestions for resources or even whether I can approach HMRC for clarification would be greatly appreciated. 

Thank you in advance

Replies (7)

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By Wanderer
11th May 2021 19:46

pfpania wrote:

..., suggestions for resources
In particular see Section 6.
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Replying to Wanderer:
By pfpania
11th May 2021 19:53

Thank you!

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Replying to Wanderer:
By I'msorryIhaven'taclue
12th May 2021 11:27

Photography was on my daughter's A-level syllabus, so where in Wanderer's link it specifies that exempt subjects are those regularly taught in schools etc you might want to do some research to see just how regularly the subject is taught. Ultimately you could always run photography past the VAT office for them to decide.

You probably noticed that Wanderer's exemption will (subject to the above) apply to you in your self employed capacity, but wouldn't if you were operating through a limited company.

To help you make sense of the rest of the matters you raised:

B2C sales of "services" that you make to UK customers are ordinarily subject to VAT at 20% (being the VAT rate in the supplier's country). If they're "digital services" (which yours almost certainly are not, because of the live tutor interaction element) then they would still ordinarily be subject to VAT at 20% (being the VAT rate in your customer's country). So, ordinarily, you'd charge 20% VAT on UK B2C sales, one way or another.

I say ordinarily because you're naturally going to want to rely on Wanderer's exemption link, at least for the services you personally (bot not your employee or other agent) provide. I suspect there may be an issue of precedence, as to which is the overriding rule, if you were supplying B2C digital services. But as you're supplying B2C ordinary services then no doubt the education exemption in W's link overrides the ordinary services (ie standard 20% VAT for UK sales, based on the supplier's country) rule.

That's probably all you need. But there's a lot of wrong turnings and red herrings, not least in the rules for EU sales. So, for the sake of completion, for B2C EU sales I'll copy and paste the rules for sales to UK customers from above, and tweak them:

B2C sales of "services" that you make to EU customers are ordinarily subject to VAT at 0% (being the VAT rate in the supplier's country - yes 0%). If they're "digital services" (which yours almost certainly are not, because of the live tutor interaction element) then they would ordinarily be subject to VAT at somewhere between 17% - 21% (being the VAT rate in your customer's country). So, importantly, for any EU sales your default position would be 0% VAT both for you and your employee or agent's lessons. Except that, overriding that, you yourself (but not your employee) will naturally want to rely upon Wanderer's education exemption.

I'll leave you to discuss the implications of exempt versus 0%, so far as VAT registration and its threshold are concerned, with your new accountant (the one who answered correctly, hopefully). Good luck!

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Replying to I'msorryIhaven'taclue:
By pfpania
12th May 2021 12:17

This is the most succinct answer to my question I have received - thank you Ihaventaclue ( bonus points for your username being one of my fave radio shows). So this is the interpretation I am leaning to - I do think that the sales of my personal and live teaching would be exempt from VAT based on section 6, whereas the sales of courses delivered by my subcontracting instructors would not be exempt based on the same point, but I want something in writing to back me up here so I have written to HMRC VAT advice seeking clarification. I have also tried their webchat but 'All our advisors are currently busy' and have been since 8am. oh well, fingers crossed the HMRC response comes quickly.
Thank you so much for taking the time to respond - truly appreciate it. It's such a minefield.

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Replying to pfpania:
By I'msorryIhaven'taclue
12th May 2021 15:03

You're welcome. Glad you're a fan of Radio 4's ISIHAC - maybe it's time I changed my avatar to Tim Brooke Taylor.

I think you've done the right thing asking for written clarification from the VAT Office regarding your own services. HMRC will no doubt repeat the advice Wanderer pointed you towards, which is fine although it would be useful for you to have their confirmation that those UK B2C teaching sessions are exempt when you deliver them live and via the internet. No such exemption for your subcontractors for UK B2C sales: their services will be subject to 20% VAT whether in person or over the net.

But you have opened another potential can of worms with "subcontractors". Do take care that the Revenue don't classify them as your employees further down the line (with all the attendant potential charges that might involve for you). And I suppose that begs the question If they're sub-contractors and not your employees, could they contract with and charge the clients directly (and pay you a commission) and thereby fall within the definition of self-employed people delivering teaching lessons, as defined in Wanderer's link, which would render their services exempt from VAT? That'd be one way of avoiding the danger of their being regarded further down the line as your employees.

I know the matter of EU sales is of secondary interest to you, but to mop that up see where under "Services Not affected by These Rules" you'll see the teaching exemption listed. Broadly, so long as you're selling something having predominantly a "live" element, as opposed to say a Youtube pre-record, then you avoid "digital services" (not just in the EU, but also or that matter in the UK).

And you want to avoid selling B2C "digital services" to the EU if you can because that would mean charging EU rates of VAT according to your customer's location; which in turn would mean your having to register for VAT MOSS in Eire or Malta (or, if you prefer, in a different EU country). Far better to be selling ordinary services - non-digital, if you like - when you're B2C to the EU (because, if not exempt, then the place of supply would be the UK and as things currently stand you'd charge 0% VAT.)

Time for a lie down. I've just had my second Pfizer jab, and am rattling on deliriously. Nap-time, everyone!

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By danielspraggon
16th May 2021 00:19

The rules are very vague around private tuition, they're open to a lot of interpretation and it's something that regularly goes to a tribunal and the interpretation is ultimately decided by the courts.

Photography is something taught in schools and universities so could qualify for the exemption. Do the topics you teach also get taught in schools and unis or do they teach different topics to your causes? If the topics are similar this could help your case.

Might be worth getting a VAT specialist to have a look at it, could cost £1,000 or so but that's nothing compared to the potential fines!

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By The Dullard
16th May 2021 15:09

Two things:

Thing 1) Don't ask HMRC, unless you really have to, and if you really have to (because it's genuinely difficult, which I don't think this is) then apply for a written opinion.

Thing 2) There is no aspect of photography that isn't taught in schools and universities (you probably don't even need to look any further than Central Saint Martins to establish that), making tuition in the subject exempt when provided by a soletrader.

Thing 3, which I've just thought of) The exemption only applies to tuition provided by the soletrader, if you use an employee or subcontractor (or if you decide to incorporate, so that you are an employee), then the exemption doesn't apply.

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