It Didn’t Add Up

An interesting FTT case saw Generic Maths Ltd, an online maths education product aimed at school pupils, challenge HMRC’s view that its services were standard rated.

The product included tests to assess mathematical knowledge alongside teaching videos.  The appellant argued that its service qualified as VAT-exempt under VAT Notice 701/30, which covers examination services, including setting, marking exams and making assessments.  The appellant claimed its tests constituted assessments under this definition.

The Tribunal acknowledged that VAT exemption does not require the service to result in a formal qualification, however, it ruled against the appellant, determining that typical consumers would perceive the product primarily as a teaching tool designed to improve maths understanding rather than a standalone examination service.  This conclusion was based on how the product was described in marketing materials, on the company website and in testimonials—all of which portrayed it as an educational aid rather than an assessment-focused service.

A key precedent referenced was the 2017 Metropolitan International Schools Ltd case, where the Upper Tribunal found that the supply in question, of distance learning services, was a single, standard-rated educational service, with books being incidental, rather than two separate supplies: one of books (which was zero rated); and one of educational services (which was standard rated).  Similarly, the Tribunal in this case determined that assessments in the appellant’s product were integrated within a broader teaching service.

To ensure objectivity, the Tribunal for Generic Maths Ltd also examined the product’s function.  Even though the product involved testing students to assess their knowledge, it ultimately served to enhance understanding rather than operate solely as an examination service.  Therefore, the appeal was dismissed on this ground as well.

The case underscores the importance of how a product is marketed and perceived.  To qualify as an examination service for VAT exemption, the assessment element must dominate over the teaching aspect.  Since the appellant’s product was primarily positioned as an educational aid, the Tribunal ruled against exemption.  

This highlights the need for businesses to carefully consider how their offerings are structured and presented when determining VAT treatment.