Stop the Further Education Tax Letter
5th February 2026
Jerry White, Principal of City College Norwich, Easton College and Paston College, has called on the county’s MPs to help end a long-standing discrepancy in education funding that sees colleges paying millions of pounds in VAT to the Treasury each year.
This is his letter in full.
Stop the Further Education Tax - Letter to Norfolk's MPs
I am writing to ask for your support in addressing an issue that is costing your community vital investment in local skills: the VAT rules that apply to Further Education (FE) colleges such as City College Norwich.
Currently, FE colleges cannot reclaim VAT even though every other part of the publicly funded education system can. It’s a totally unjustifiable anomaly that has direct implications for your constituents: a young person attending a local school sixth form gets more investment than if they go to an FE college. That is deeply unfair, bad for social mobility and bad for growing the economy which relies on the skilled talent delivered by FE colleges around the country.
At a national level, this FE VAT penalty costs colleges around £200 million every year. For our college, the impact has been very significant. Every academic year, around £1.5m of our educational funding is paid back to HM Treasury in VAT, money that should be allowing us to invest in our students and our staff. Furthermore, since the 20/21 academic year capital money provided to the college to invest in the buildings and equipment we need to keep our technical education relevant has been diminished by a staggering £6m.
We have worked hard with parliamentary colleagues to discuss this issue over many years. We were pleased that the Education Select Committee in their 6th Report on Further Education and Skills (published in Sept 2025) referenced the impact that VAT had on our recent creation of a Construction Skills Hub for the region, where £800k of the DfE funding provided to the project returned directly to HM Treasury rather than being used to increase educational opportunities for young people within our community. Indeed the Education Select Committee stated that:
Whilst academies and schools with sixth forms do not have to pay VAT, FE colleges and standalone sixth form colleges are not eligible for refunds in the VAT they incur on their expenditure. As colleges were reclassified as public bodies in 2022, this arrangement is unjustifiable and FE colleges and sixth form colleges should now benefit from a VAT exemption, which would align them with other post-16 education providers.”
It was great to hear the Education Select Committee raise this issue directly with the Prime Minister on 15th December but we need your help to ensure this matter is kept in the spotlight and a definitive change is secured.
We believe there are compelling reasons why this VAT issue must be addressed.
Bad for the economy: the work of FE colleges has never mattered more in delivering the skills our economic growth depends on. The Post-16 and Skills White Paper places a clear national priority on technical education and building a skilled workforce. FE colleges are doing the heavy lifting. Yet while schools and academies can reclaim VAT under Section 33 of the VAT Act 1994, and private schools can pass on VAT increases through their fees, FE colleges can do neither. An item costing a school £100 costs a college £120. Across the sector, that difference removes £200 million a year from investment in classrooms, workshops and specialist facilities.
Bad for social mobility: the students who need help most are hit hardest by the FE VAT penalty. FE students are far more likely to come from disadvantaged backgrounds and lower-income households than students in school sixth forms. FE colleges have a higher proportion of learners receiving free school meals, young carers, care leavers and those progressing from lower attainment. By losing £200 million a year to VAT, colleges have less funding for support services, mental-health provision, specialist teaching, employability skills and other wrap-around support.
The young people disadvantaged by this tax anomaly are disproportionately drawn from some of Britain’s most disadvantaged communities. As a result, the current approach risks widening social mobility gaps and entrenching inequality.
Crucially, FE colleges also deliver A Levels, just like school sixth forms. They teach the same qualifications to the same age group, but one group can reclaim VAT and the other cannot. There is no educational, financial or policy reason for this inconsistency.
How you can help: a simple change with big impact
It’s a simple fix – we just need to extend the current Section 33 VAT rule for school sixth forms to also include FE colleges. It’s literally just adding one clause to the Finance Bill.
The LSE report commissioned to provide insight into this issue can be found here.
We urge you to support putting this right. Ending the FE VAT penalty would immediately make the skills system fairer, more efficient and better aligned with national priorities. I’d love to discuss this in person, either at our college or I am happy to come to Parliament.
I look forward to hearing from you.
Yours sincerely,
Jerry White
Principal and CEO, City College Norwich, Easton College and Paston College