Private schools and charity status

[The6thQueen]

Yes, another thread. But, maybe from a different angle?

I'm interested to know how many mumsnet readers know that most universities are charities or are charity exempt (including Oxford). That we don’t pay VAT on university fees, or services from healthcare providers (including non registered, if they are supervised by registered healthcare), including pharmacies and, that private healthcare suppliers fall under this exemption.

I’m raising as Labour’s altered plans with regard to charity status and taxes for private schools may be far more complicated than the public expects. Legalities and the far reaching impact the policies may have beyond education and its VAT exempt status.

I suppose my AIBU is that most of the general public don’t realise the use of charity status and VAT exemption and how removing them from the private education sector is not that simple.

I agree with your point re the knock on effect in other vat exempt businesses. I am a dentist, we effectively sub contract to the NHS but also provide private services. A significant proportion of the private work is elective cosmetic treatment which really should attract VAT. It does save a lot of hassle not having to do VAT returns.
If they do change the law re private schools then there is a good chance they will start to look at other easy forms of revenue from elective private health sector. Then where will it stop.

Well completely @MotherEarthisaTerf - they’ve not thought about all us parents saving them a fortune by paying school fees for independent school rather than forcing the LA to pay via an EHCP. SEN is the only reason any of my kids are in independent schools.

@MotherEarthisaTerf I feel for you, I really do. The state doesn’t offer decent support for parents with statemented children and should be grateful you are willing to pay for help. To add 20 % more is a nightmare.

What about super wealthy uni students? The ones who will pay VAT at private schools before they go to uni? They are disproportionately represented at uni already.

what annoys me is it’s not a tax on wealth or at the source of earnings. It’s on what they consider easy to grab, even if it affects children. Yes people who attend private school have wealthier parents than average - but this wealth is vastly different from family to family.

fwiw we plan on funding our private school by downsizing, moving somewhere cheaper and using equity. the eldest starts secondary in 2 years- if labour comes into power we will instead go for plan B.

Thank you, the past few years fighting for support for their hidden disabilities has been absolutely harrowing. My children need more, I’ll make sure they get it.

As @Circe7 mentioned, we’ll pay all DC’s fees until the end of 6th form up front, before it’s implemented. A huge number of parents at DC’s school are considering the same. It will be cheaper to remortgage the house to fund it than pay 20% VAT.

Universities aren't "charity exempt" re VAT on fees

Private schools that are run as businesses, not charities, are exempt
Private schools that are charities are exempt

Preschools and nurseries, whether business or charitable, are exempt.

That is because EU enshrined in VAT law/regulations "no taxation on education"
Since Brexit, we can rewrite those rules.

The charity angle is completely irrelevant.

But if they change it so that there is VAT on fees for education in certain circumstances (which already exists btw to a certain extent for crammers that just sell the course, rather than the full range of school/university life) then it will be achieved (probably) by defining the institution which must charge it.

As a previous poster said, the idea that the state sector will benefit from teachers living from the private sector is a fallacy. They will simply move abroad to international schools or leave the profession.

@MotherEarthisaTerf
I’ve read that education for children with SEN may remain exempt (obviously no guarantees). Labour will probably need to consult on VAT on school fees. Most tax changes like this go through consultation. This process might be rushed because they want to push it through quickly. At that point I would recommend responding to the consultation to highlight the issues for children with SEN and get as many other parents as you can to respond. My firm and other law firms often respond to these sorts of consultations to suggest areas where the proposed law won’t work or would be unfair and would do that here specifically on the SEN point. I think you have a good chance of getting special treatment for children with SEN but the key will be getting the legislation wide enough to cover all children affected.

Not for profit, no dividends, legal covenants & charitable board oversight = charity
As a collective private schools provide £930m towards bursaries / scholarships pa, making it one of the biggest charitable providers in the UK.
No other charity pays VAT, no other education (including tutoring, university tuition fees) services pays VAT.
No other country in the world charges VAT on any educational service or registered charity
I'm Labour too, its a terrible regressive policy. Raise taxes, stop copying the Tories tax code & stop throwing red meat untruths around to justify this nonsense

Are you sure it requires legislation?

Why wouldn't the issuing of a new VAT notice suffice?

Will independent schools not be able to disaggregate their fees and charge separately for the education element to the childcare/ food / other aspects of school life?

VAT is not charged on essential goods like milk, bread, even physical books

Physical books (and certain other printed materials) are free of all sales taxes across the world (UN treaty, the Florence Agreement) - no tax on knowledge/education

Essential foodstuff are subject to VAT in some EU countries (eg Sweden). They are not VAT exempt, rather they are zero-rated in some countries including UK

Not all private schools have charitable status. Some are purely a business and might be part of a large group

@RoseAndRose
I would have assumed it requires legislation because the definition of eligible body is in the notes to group 6 of Sch 8 VATA and the notes are amended by legislation. Charitable private schools currently meet that definition. Would be interested if there’s a different view though? It obviously does depend how they implement it.

I hope they will be given an exemption but I’m not hopeful.

im also concerned because any form of diagnosis and support in schools / camhs for neurodivergency is barely there. Only if your child is in crisis. People whose children are barely coping in education who decide a small quiet school will suit them may not appreciate it’s because their child has undiagnosed SEN. In our area dyslexia isn’t even diagnosed?!

many parents who push for private out of need may not get the Sen qualification for reduction in vat. All this to distribute wealth. To tax a ‘luxury’ spend. Just feels really backwards to me.

we need our country to grow in education, innovation, technical services etc. we want to be industry leading in lots of areas - Labour want to achieve this by taxing learning?

@Nowanextraone my LA pay for my child's EHCP place in an independent (mainstream) school. No way you should fund yours.

I have always had the impression that people don't really get the concept of charity status, because they are confused by the word"charity". And it tends to bring a sense that an institution is doing some kind of good work for poor people.

But it can also be about the state not getting tax from basic parts of human life, so long as they are not being operated on a for-profit basis.

So parts of human life that are seen as necessary/important for people to do - like educating their children. Yes, the state does offer education, but no one is required to submit their kids to what the state sees fit.

Parents have a duty to see their kids educated and the right to do so in the way they think best, without paying taxes to the state for that privilege, (so long as the form of education does not go so far as to deny the child their right to a good education.)

One way parents can do that is to hire a tutor, or get together with other parents and fund a school. So long as it's not a for-profit enterprise, why would it pay taxes? The parents are already paying their own taxes, the teachers etc hired are paying taxes, and they are all paying taxes to fund state schools. The idea that the state would make parents pay extra to educate their own kids rather than send them to state school is quite invasive really.

They're not planning on this being a measure just for private schools which are charities, but for all private schools.

Does that make any difference?

One way parents can do that is to hire a tutor, or get together with other parents and fund a school. So long as it's not a for-profit enterprise, why would it pay taxes?

The parental funding (ie fees) would be subject to VAT under these plans, no matter how small the school. Plus the parents would have to cover all the governance standards of a school, which might prove onerous.

I completely agree and i'm so surprised amd disappointed Keir Starmer would be even considering this

What charitable benefit do private schools provide? They are businesses. They aren’t teaching kids out of the goodness of their hearts.

@MotherEarthisaTerf what about SEN (EHCP) children in mainstream independent schools?

He’s such a good lawyer that it took him a years to work out that abolishing charitable status would be very difficult from a legal perspective. So he only abandoned that policy about a week ago even though many of us have been pointing out the problems with ending charitable status for a very long time.

@Penguinmouse the 'profit' for want of a better word is going back into education - bursaries, partnerships, outreach, education etc.
How is a school 'business' different from any other charity that pays CEOs exorbitant salaries. Schools aren't making profit for shareholders or a CEO to cream off in dividends.