Treasury written question – answered at on 16 March 2026.
Neil Hudson
Shadow Parliamentary Under Secretary (Environment, Food and Rural Affairs)
To ask the Chancellor of the exchequer, what assessment she has made of the potential impact of VAT liability on further education colleges’ capacity to deliver the skills priorities set out in the Industrial Strategy; and whether her Department plans to extend VAT exemption to further education colleges.
Dan Tomlinson
The Exchequer Secretary
Further Education (FE) funding is vital to ensure people are being trained in the skills they need to thrive in the modern labour market. The 2025 Spending Review provided an additional £1.2 billion per year by 2028-29 for skills and £1.7 billion of capital funding to help colleges maintain the condition of their estate. In addition, the Government is providing £375 million of capital investment to support the FE system to accommodate increasing student numbers.
For their non-business activity, FE colleges are unable to reclaim VAT incurred. We operate several VAT refund schemes for schools and academies which are designed variously to ensure that VAT is not a burden on local taxation, and that academies are not disincentivised to leave LA control. FE colleges do not meet the criteria for either scheme.
In relation to business activity, FE colleges enjoy an exemption from VAT which means that they do not have to charge VAT to students but cannot recover it either.
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