VAT treatment of Advanced Learner Loans

HMRC have issued a brief on the VAT treatment of funding received by way of Advanced Learner Loans.

Commercial training providers are able to exempt income from VAT for certain types of training, where it is ultimately funded by the Secretary of State for Education. In the case of Advanced Learner Loans, whilst the loan which is used to pay for the training comes from the State, ultimately the student pays for the training by way of the loan. That being the case, the cost is borne by the student not the Secretary of State for Education, which means that standard rate VAT applies. Training providers who have ‘eligible body’ status, such as schools, universities, further education colleges and non-profit-making bodies that ring-fence any surpluses to supplies of education, can continue to treat their supplies as VAT exempt, subject to the normal rules.

In the past, many providers have been given incorrect rulings and guidance on this matter by HMRC, and many will therefore be under-declaring VAT on income. Providers who have received a formal written ruling should be sent revised guidance in respect of future income. Those who believe that they have received guidance other than a written ruling, should write to HMRC by 31st March 2018, explaining the reasons for applying the exemption. In all other cases, the correct treatment must be applied with effect from 24th January 2018.

Be prepared

The Brief does not explicitly state that past periods will not be revisited. In light of that, businesses should protect their position by informing HMRC that they have relied on HMRC’s previous guidance and will apply the new policy as set out in Revenue and Customs Brief 2 (2018) with effect from 24th January 2018.

If you require any business tax advice or assistance in contacting HMRC, please do not hesitate to get in touch with a member of Menzies VAT advisory team. Should you require any further details on this issue, please contact Sarah Barron on 01489 566298 at Menzies LLP or by email at

Find our more about Menzies VAT Advisory services.

Posted in Blog, Healthcare, Hospitality & leisure, Manufacturing, Not-for-profit, Property & construction, Retail, Technology, Transport & logistics, Recruitment, Legal Services, Financial Services