Driving Instructors and VAT – Who Pays?
The VAT liability of the supply of driving lessons is an interesting issue that can be of relevance to other supply scenarios such as hairdressers and other workers in the beauty industry.
In HMRC’s internal manuals the guidance identifies three possible scenarios that can apply to someone providing driving lessons to the public:
- The driving school employs its own instructors under contracts of service. HMRC comments that this method is probably only used in a minority of cases. When this is the case, the driving school is supplying the tuition to its pupils and must account for output tax on the full value of fees received. The driving school is making the supply of tuition to its customers and there is no supply by the individual instructors, who are simply receiving remuneration (wages) for their services as employees.
- The instructors supply their services to the school under a contract of services. They need only account for output tax on these supplies if the value exceeds the registration limits. The school must account for output tax on the full value of the fees received from pupils.
- Each individual instructor supplies tuition services directly to their pupils using the driving school as an agent. Output tax is only due on the value of those supplies if an instructor exceeds the registration limits. However, payment made by each instructor to the school is consideration for a supply of agency services by the school, and the school must declare output tax accordingly.
Looking for more information on how to recover VAT on car purchase? Read more in our latest article breaking down the rules surrounding it.
Wanting to find out more about registering for VAT and the rules around it? Check our our VAT guide and the rules and legislation from HMRC.