Originally Posted by
Weathergirly
Tests and Exams do not attract VAT. It does not matter if you are VAT registered or not.
Eye tests - VAT Exempt
Driving Test - VAT Exempt
MOT Test - VAT Exempt
Flying Test - VAT Exempt
Any Exam - VAT Exempt
No service has been provided so no VAT charged.
Weathergirly's replies (#5 and #7) don't quite hit the spot.
And there is no blanket VAT exemption for "tests and exams".
And (excuse the nerdiness) it is incorrect to say that no service has been provided.
In VATspeak, the provision of a flight test in return for a fee is a "supply of services" (This is basic stuff - for the curious it comes from section 5 of the VAT Act 1994).
Strictly, the crucial questions are (1) whether the supply is outside the scope of VAT altogether (e.g. MOT tests and part II of the driving test, because that kind of testing is a statutory function); (2) whether it is exempted by a specific exemption (e.g. tests conducted by a doctor, optician etc and "examination services" provided by an "eligible body"); (3) whether it is zero-rated by a specific zero-rating provision; and (4) whether it was made by way of business; and (5) whether it was made by a person liable to be VAT registered (i.e. a person over the turnover limits).
All of that goes to whether the examiner ought to account for (=pay) VAT to HMRC on the fee (in which case, the examiner would doubtless want to add 20% to the fee) and is all very interesting (at least, to me) but unless the examiner has a turnover from all business in excess of the VAT threshold, is completely academic.
But, as others have already pointed out, in the case where the fee was paid to a school that passed it on to the examiner, the obvious point is that if the school was simply collecting the fee as the examiner's agent and that was made clear to the student, then the school has absolutely no business "deducting" VAT on the way through because the school is not providing any service for a consideration to anyone. There is no supply and so no VAT arises.
Again, as others have pointed out, if the school took a fee from the examiner for arranging the test and collecting the cash, then that fee would be subject to VAT, but that's not what is being discussed.