Discount on pre payment of fees

A few years ago, a family joined our school with 3 children - twins and an older child. Parents enquired about a discount for paying fees in advance for the ENTIRE time the children would be there which was 5 years for the twins and 3 for the other child, so 13 years of fees in total to be paid in one lump sum at the beginning. School said no discount was available!

One of the big advantages of advance payment is that the fees are outside your estate for IHT purposes. So if you die your DC effectively get a 40% decrease in their fees.

Would paying fees in advance be a protection against VAT on fees, does anyone know, or would the VAT still then need to be paid?

Most established schools already have what is known as a fees in advance scheme.

For most, you pay any chunk of money in (often far in advance of children starting) and through an agreed % increase it provides X amount towards each term of fees. Grandparents often use this as tax efficient giving. These schemes are well established and if your child doesn’t go or leaves before the end there’s no prob in getting money back. They work best if you can pay in well before fees needed. i think whitgift and Sevenoaks schools have worked examples on their websites so you can look at those.

Some schools offer a small discount for paying a year up front instead of just a term - these are usually smaller schools which are strapped for cash.

I knew one school which allowed parents to pay 3 years in advance at current fee rates and avoid fee rises in years 2 and 3. When fee rises were 4% this was a fair gain but when they were 8% (not uncommon a few years ago) it was a big gain. They don’t offer that anymore.

Bear in mind school fees are set to revert to much higher rises. From April independent schools as employers have to massively increase their pension contributions which is a massive expense which will have to be covered.

I once asked and it seemed miniscule, it was something like a 1% discount if you paid 5 years in advance or so... little did I know then that fees would rise 5% every year, so in hindsight it was an excellent deal, I should have done it. Even if you get no discount, if you pay the current rate, you save on the fee increase, which can be a very significant sum. I agree you need to check how stable the school is, if it is an established top school or the GDST etc no problem, but not a small undersubscribed private school.

Do be aware that schools can fail as all businesses can fail, I would advise against paying in advance too far into the future. Also how about if the school isn't right for your dc and they want to leave?