Is government-funded vocational training VAT exempt?

What vocational training means

HMRC treats vocational training broadly: training, retraining and work experience for paid employment, and for voluntary work in areas such as education, health, safety, welfare and charity work.

Which funding counts

• The Department for Education, which took over the funding work of the Education and Skills Funding Agency when that agency closed in 2025.
• Funds drawn from an employer's apprenticeship service account, which HMRC has treated as qualifying since 1 May 2017.
• The equivalent bodies in Wales, Scotland and Northern Ireland.

The word ultimately matters. A subcontractor delivering funded training for a lead provider can be within the exemption, because the money still comes from the qualifying source further up the chain.

To the extent funded

The exemption covers the funded share and nothing more. If a course is part funded and the learner or employer pays the rest, the provider has to look at the private share separately. It is exempt only if another route applies, for example because the provider is an eligible body. Where your arrangements mix funding sources, check how HMRC treats each part before you invoice.

Common errors

• Charging VAT to a lead provider on subcontracted funded delivery.
• Treating a whole course as exempt when only part is funded.
• Recovering all input tax on costs that are partly used for exempt funded training.

The first is the kind of error that can be put right with a claim for the last four years. The other two can lead to HMRC assessments, so a review should look at both sides.

Sources

1. VAT Notice 701/30, vocational training and funded training: GOV.UK
2. VAT Act 1994 Schedule 9 Group 6: legislation.gov.uk