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We are not obliged to see ID for funding purposes full stop. It's definitely good practice, and can be required by Awarding Organisations. Students can self declare residency and that is acceptable to ESFA. Lots of British students don't have passports and have lost Birth Certificates. We would always accept an expired passport as long as they didn't require a visa. I guess it's possible someone has given up British nationality, but probably not if they're still living here.
That's my interpretation. If you had a birth certificate but no passport, and they've declared they are a British national, you would accept that, but that's less sound evidence of eligibility than an expired passport. Someone who has ever had a British passport is very likely to still have British nationality. Anyone born in the UK since about 1982/1983 doesn't automatically have a right to British nationality, so they could have just been born here, and not actually have a right to be here still. We don't insist every apprentice provides a passport, as a lot won't have one, so you just have to make best judgements.
We've been audited lots of times, and ESFA have never had a problem with us accepting self-declaration of Nationality, and us stopping there if they're British (and have been in the UK three years). We do try and see ID for all our students, but where that's not possible, and they're self-declared British, we take a pragmatic approach. If you're only working with apprentices, they should have provided some assurances to their employer, since it's the employers legal duty to ensure they're employing them legally. If you check the rules for employing people legally here (Annex A, point 1), it specifically says an expired passport is acceptable. If it's acceptable for employment, it must be acceptable for study!

Nicola Lespeare
Expired UK passport
Created
Hi, Where a learner has an expired UK passport, does the passport need to be valid (in date) in order for it to be used as the confirmation that we have seen the learner’s identity documents to verify their residency eligibility? Thanks.