Private Schools being able to hold charitable status

[IdiotCreatures]

I went and looked at a building associated with a local independent school yesterday, as it's always piqued my curiosity.
The school is run by the Woodard Corporation. I looked at their books on company house yesterday.
The amount of money moving through them is ridiculous. If people want to pay for a private education, then surely the institutions should be taxed.
Apart from a small number of scholarships, the average person is not benefiting from these institutions.
In the case of Eton, as pointed out on another thread, these schools are probably leading to damage to society and definitely do not promote the idea of equality.

The charitable status has very little impact as most schools do not make a huge taxable profit. They are charities so their income is necessarily spent on fee reductions or capital investment etc. I believe the main impact will be the liability to business rates.

The much bigger issue is VAT on fees and that has nothing to do with charitable status.

If we want education to be chargeable to VAT at standard rate then we will also see VAT on nursery fees and university fees. How can you differentiate private schools from any other form of educational supply? It would also mean input VAT arising on much of their expenditure on tuition materials etc and this would increase the expense to all schools including the state sector. I don't see how any new laws could single out private sector education as standard rate without the state sector being seriously impacted too. Many of the posts on here (and elsewhere on the internet on this topic) just show a lack of understanding of how tax works.

Private schools cannot make a profit by definition of their charitable status. So they wouldn't pay tax on something they don't have. But they only pay 20% of rates on buildings they own. This does account for millions overall. Having schools pay this would mean they pass on the cost to the parent, making it unaffordable for many (most?) and putting these kids in state schools.

The state subsidises them by letting them pay less tax than businesses. Charities have a number of tax breaks on business rates on buildings, vat on fees, and can claim Gift aid from the government on donations.
I do find it amazing that the top 5% of earners in the country apparently need subsidising by the government. It is a true nanny state.

They don't get a "tax break" of no VAT on fees because they're a charity. Provision of education (of a kind taught in schools) is VAT free whether it's a charity or not. Taking away charitable status doesn't make their fees VATable. They've had to change the VAT law so that education was VATable whoever provides it, therefore people would end up paying VAT on everything, i.e. music tuition, swimming lessons, etc etc whether they're at a private school, state school, or out of school activities.

Looking at how state schools are unable to accommodate children seeking school places - I’d leave private schools to it! From
the people
i know who send their kids private yes it’s a choice but it’s a bloody stretch and the state sector could not cope with the increase. It can’t cope now!

@Badbadbunny I was wrong about the vat then. But I am not wrong about the business rates on buildings.
Why should parents with children at private schools be subsidised by taxpayers?

No, absolutely not. Removing their charitable status would mean the end of means tested bursaries and scholarships, and create profit driven businesses (which despite what people think, they aren't currently).

This would largely kill the independent school sector off for all but the ultra wealthy (the 0.1% rather than the 8%). A healthy school system that is INDEPENDENT of government is one of the cornerstones of a civilised, democratic free country.

Under no circumstances should the government have a monopoly on education! Insane suggestion!

So private schools only offer bursaries and scholarships because they are forced to?
I am surprised you are defending taxpayers paying for this. And I am surprised that you think families will abandon private education if they are no longer getting taxpayer subsidies. Nearly all children who attend fee-paying schools live in a household with an income of £100k or more. Do their parents not value their education enough to reprioritise their spending for what will be a relatively modest fee increase? Are they not willing to make sacrifices? I find that opinion sad.

They're not. The amount of the business rate reduction is less than the taxpayer saving of having fewer people in state schools costing the taxpayer several thousand pounds each per year.

@Badbadbunny That is irrelevant. Taxpayers are subsidising people's choice to put children in private schools. I am simply saying that if people want to privately educate their children, they need to pay for it and not expect a taxpayer handout.
I do not get a taxpayer handout because I have bought my home rather than living in social housing. I do not get a taxpayer handout if I use private ante natal classes rather than those run by the NHS.
Taxpayers should not be paying for this. And I think it is incredibly entitled of private school parents to think taxpayers should be giving them handouts.
If I was Prime Minister I would start by making it law that all private schools had to publish what fees would be without charitable status, and what they are now. I would want all parents to know just how much taxpayers are funding fees by. Then we could have a proper conversation about whether this was a good use of taxpayers money.

@antelopevalley it's coming across as if you cannot appreciate and understand the points being made on this thread because you are blinded by your distaste for those who have the choice to privately educate their DC.

PP have explained repeatedly that parents who choose private schools are paying their taxes towards state schools as well as their place at PS.

Subsidy has also been explained, the state is not subsidising PS places which you state that appreciate re VAT but then turn to business rates.

It seems like it's an issue that personally disgusts you as you're not able to appreciate the points that people are making?

Clearly, it wouldn't be beneficial for the state for multiple PS to close and those children to go into state.

If you are so against PS, don't send your children there?

You keep making the assertion that this is subsidy without explaining it. I pay tax at a higher headline rate than a corporation does. Do you think that means the corporation is being subsidised?
conceptually your argument is all over the goddamn place.

There is no handout. You appear not to understand the difference between giving and taking.
the confusion is deep, my friends

Amén to this. Finally some actual understanding and sense

I am not confused. Preferential tax treatment is a taxpayer subsidy. We give this to charities as they have purposes for the common good. Many charities the state depends on such as RNLI, Red Cross and WRVS. Not paying business rates on buildings is a reasonable taxpayer subsidy given their purpose.
Private schools provide education for mainly children of the top 5% of earning families. I do not think they should have a taxpayer subsidy. Parents should pay the full cost and not have taxpayers subsidising them.
Not including subsidies as part of any economic discussion is short-sighted. The government could decide that any income I earned was no longer taxed - just me. Even though the government is not giving me hard cash, it is clearly giving me taxpayers money through a subsidy.
There are times using taxpayers money in this way is justified and genuine charities is one of them. Private education is not a justified use of taxpayers money.

It isn’t preferential tax treatment. Different types of legal entity receive different tax treatment. This has always been the case. as I’ve mentioned several times previously, incomes of corporations are taxed differently to incomes of natural persons. No one thinks this is a subsidy or tax break, because it isn’t.
and you still seem confused about the difference between giving and taking. The government is not giving the schools anything. It is taking from them (ie taxing them) on a different basis to that on which take from other types of legal person.

And in addition, those schools which operate as charities (not all do) are subject to the constraints applicable to that type of entity. All the regulatory and governance requirements, the public benefit requirement, charity commission oversight. So they have to be the tbh g they claim to be to be taxed on that basis.
id be interested to hear from you what sort of legal personality you think they should have, to meet your exacting social justice requirements

The government is giving private schools a subsidy by allowing them to be designated as charities. I am not sure what is so hard to understand about that?
Tax breaks for married couples or blind people are recognised as taxpayers giving a financial benefit to certain people.
I am not making this up as you seem to think. This is well recognised.

And charity commission oversight is light. I understand charity law, if a private school was struggling to meet that they should not be running. And I mean that they would be chaotic unsafe organisations to care for children. It really is not onerous at all.

So, you are incorrect about the legal and governance requirements for charities not being onerous. If you’ve ever had involvement as a trustee you’ll know that’s not so. But leaving that aside, I’m at a loss still to understand where the subsidy bit comes in. Subsidy, as stated, means being given something. What is it you think the private schools are being given? If the school is a charity, it has to operate in line with charities law, deploy any surplus towards its charitable purpose - it has to be the thing it says it is. And then it is treated accordingly. Where does this involve a subsidy?

It’s like saying a company is being subsidised if it complies with company law and is subjected to corporation tax instead of the individuals involved being subjected to
Income taxation. It just makes no sense.

@TullyApplebottom charities are given preferential tax arrangements in exchange for carrying out activities that are of public benefit.

Whether the activities carried out by private schools are of public benefit is a debatable point, on which reasonable people may disagree.

Rather than getting hung up on what a "subsidy" is, perhaps it would be a more productive discussion if people focused on whether private schools do, indeed, carry out activities of public benefit?

My own view is that private schools do not offer a net public benefit. While I can certainly understand why people wish to pay the money, in exchange for advantage in terms of credential-gaining (via gaining preferential admission to Russell Group universities and other institutions), that's not a public benefit.

What is the public benefit of private schools that justifies their tax treatment?

(And if you don't think the current treatment of private schools as a charity is in any sense preferential, then what's the problem with them losing that status, assuming they don't actually meet the public good test?)

I am correct. The legal and governance requirements for a charity are not onerous at all. Audited annual accounts, annual reports, and a properly elected governance body that complies with the law and good practice around issues such as financial regulations and safeguarding. Any school should be doing all this as a matter of course. And if anyone tells you they are onerous e.g. a tiny independent school, then I would be seriously worried about their management and governance arrangements.

@antelopevalley if an institution finds the legal and governance requirements related to charitable status onerous, then this is a signal that they may not be very well aligned towards being a charity.