Weekly VAT News

RCB 3 (2026): VAT treatment of public funds received by further education institutions

HMRC have published Revenue and Customs Brief 3 (2026) on the VAT treatment of certain public funds received by further education institutions. The RCB sets out HMRC’s response to the Court of Appeal judgment in Colchester Institute Corporation. The RCB explains that historically HMRC took the view that amounts paid by government agencies to further education institutions to fund free education provided to eligible students were a grant, and outside the scope of VAT. However, in Colchester, the CA confirmed the Upper Tribunal decision that the funding was third-party consideration for the supply of education services to students. The RCB states that HMRC will not be appealing the CA judgment, which they will now consider further, in consultation with stakeholders. Any change in policy will be announced by way of a RCB and updated guidance. Following the UT decision, HMRC gave further education institutions the option either to treat funding as third-party consideration or to continue treating education as a non-business activity. According to the RCB, for institutions that have continued to treat education as a non-business activity, any change to the VAT treatment will only apply from a future, yet-to-be-announced, date. Such institutions may continue to apply the relevant VAT zero- and reduced-rate reliefs, until the date of any change, and HMRC will not revisit prior periods. Institutions that adopted the third-party consideration approach should continue to do so. Such institutions should not have continued to apply the reliefs, and also may be within the scope of the private school fees legislation. (Contact: Jacqui Nicholls)

Climate change agreements – draft SI

A draft of The Climate Change Agreements (Administration, Energy-intensive Installations and Eligible Facilities) (Amendment and Revocation) Regulations 2026, and an accompanying tax information and impact note, have been published to extend the scope of the climate change agreements (CCA) scheme. The CCA scheme is a voluntary scheme under which eligible facilities can enter into agreements with the government to reduce energy use or emissions in exchange for reduced rates of Climate Change Levy (CCL). The CCA scheme applies to listed eligible processes. Following a consultation, the regulations will extend the eligible processes to include the mechanical recycling of plastics, the packaging of spirits, and the production of automotive grade battery cells, with effect from 1 January 2027. The regulations also make some drafting changes and corrections to certain CCA regulations. The government has also announced that carbon price support (CPS), an additional rate of CCL paid on fossil fuel-generated electricity, will be removed from April 2028. The removal will be included in a future finance bill. (Contact: Zoe Hawes)

Global trade updates – Deloitte articles

The World Trade Organization held its 14^th Ministerial Conference (MC14) in March, in one of the most challenging periods in the organisation's history. For details on what was agreed and what it means for businesses, see Deloitte’s analysis.

The May 2025 summit between the UK and the EU marked the formal beginning of a ‘reset’ of relations. Following developments since then, our Deloitte article considers what this reset means for businesses, particularly involving agri-food trade, emissions trading, and workforce mobility.

For further information on key international trade policy developments, see the latest edition of Deloitte’s Trade Developments newsletter.