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.

Exactly and the argument that private schools are 'not for profit' is frankly absurd. They certainly profit when they have the means available to build new language centres, tennis courts, science centres.... the list goes on. Meanwhile, state schools down the road are literally crumbling.

The policy won’t affect the wealthy or the most elite schools. It will affect the smaller private schools and the middle class families who spend a significant part of their income on fees. There is no tax dodging. I earn four times as much as someone on minimum wage and pay ten times as much tax. It would cost the state £7k per year to educate my DS. I am saving the taxpayer that amount whilst contributing £25k in tax myself.

You are absolutely deluded. I have not known one class teacher at my DS’ private school leave for the state sector. A few for senior leadership roles but that’s it. Why would they want to change from teaching 20 in a class to 30 plus, to get less holiday, no fee discount on their children’s school fees… they will either move to other private schools or leave teaching altogether.

Teachers I know working in the private sector were unsuccessful for public sector jobs and/or not qualified to work in the public sector. Regardless, private schools aren't going to close at such a number that there are lots of teachers at a loose end. It makes sense to me, they're not charities and serve the wealthiest in society. Universities are different, as someone said the entry criteria is not based on wealth although like everything in life, is certainly easier to get in with it. Besides, no need to conflate the issue and private schools and the impact on tax receipts is reasonable to look at.

This post is a bit bizarre. The government doesn’t “control” universities - they are independent educational charities just like private schools are. Nearly all government funding has been removed from the university sector - that was the entire point of fees, remember?

Universities, like private schools, generally operate at break even, or often at a small deficit. Any surplus - unusual, tbh - is then reinvested or used to pay down any borrowing/make payments into pensions/invest in infrastructure - stuff like that. Most private schools’ accounts essentially look like state schools’ do - except the funding us coming from fees rather than from the government. Essentially, very like the situation that universities are now in with fees. That’s why the OP’s point is important.

State schools are also technically what are called “exempt charities” under the DfE (as the regulator instead of the Charity Commission).

It doesn’t really make economic sense to want to treat private schools as businesses - it’s a policy based entirely on not liking the idea that some parents are paying. As to what would happen if they all closed? The education budget - your taxes - would need to pay for those children’s education instead; so it would/will cost you personally more if private schools are abolished/disappear, as either taxes would need to rise to cover it, or public funding elsewhere would need to be cut. It wouldn’t be as negligible an amount as you think, either.

Charity law is pretty complex, and OP is right that there are all sorts of ramifications when you try to remove exemptions in some places (for example, a minute tax break enjoyed in my field was unable to be removed despite HMRC wanting and trying to, because its removal would essentially impact on the funds of the entire Church of England, which would then be unable to afford to pay its ministers. Bizarre, I know.)

Many of the teachers at my DS’ private school taught in state schools before they moved to the private sector. I can ensure you that they are all properly qualified.

I don’t think so. The education is drafted in terms of eligible bodies. Most charities meet this definition which is what makes supplies of education by private schools which are charities VAT exempt. If a private school isn’t currently an eligible body it will probably already be charging VAT on fees. Some VAT notices or parts of them have the force of law but only where the law says that detailed rules are set out in a notice and notices don’t directly contradict law.

I’m not sure why you think this - they really aren’t. Regardless of whether you meet the formal entry criteria, a university doesn’t have to make you an offer. There are a certain number of places; and admissions staff decide who is offered one. They pick the students, not the other way around!

Plenty of applicants meet the criteria but are not offered a place, especially at the most competitive universities.

@bellamountain
It’s worth noting that even if private schools weren’t charities are were subject to corporation tax they would pay little to none because spending on tennis courts, new theatres, staff salaries etc is all deductible for corporation tax (over time).

Labour has probably dropped the charitable status thing because private schools would pay very little tax on normal principles.

Universities are academically selective but many private schools are not. There are many private schools that are less elite than Oxbridge, for example.

@Dibblydoodahdah from the isc "Some independent schools will appoint teachers with no training or experience but plenty of potential, others will not." It happens more than they'd say! Top schools too where you're a friend or relative of the right person

@Dibblydoodahdah how would you even know? Do they have to tell you where they go? Some reasons include not having to be onsite evenings and weekends for extras, more progression, better pay and conditions. Of course a tougher job in a state school but some state schools are better and more pleasant to work in than some independent schools.

In ten years at my DC’s prep they’ve appointed one newly qualified class teacher and even they were fully qualified, they just didn’t have any post qualification experience. In fact, when my DS1 was in pre-school they even had two fully qualified teachers in there, not just nursery nurses as they did in his day nursery. Anyway, if the private sector is so full of non-qualified teachers why are people getting their knickers in a twist about the “elitism” of private schools?!!!

We always get told where a leaving teacher is going to. It’s published in newsletters. My DS2’s state school do the same!

@fattytum There are a growing number of privately run universities in the U.K. Buckingham is one, BPP is another. We are up to about 50 now. So there is a growing private alternative that earns billions for the U.K. every year and provides thousands of jobs.

The independent school my ds attends is not a business, it makes no profit, has no shareholders and provides scholarships, bursaries and charitable services such as providing the provision for the key workers during covid because the local state school refused. Ours also provides for the children of members of the armed forces, who have been posted abroad.

You need to fully understand the wide ranging damage a change to VAT rules would cause. Not all private schools are Eton, or anything like.

Yes indeed - I think people simply don’t understand that private schools, like universities, are not making profits. Because they are charities any surplus gets reinvested, there isn’t anyone to pay it to - so it wouldn’t generally be taxable anyway. But most educational charities aren’t making surpluses, no matter how plush they seem. Generally, they’re expensive because what they’re providing is expensive. The biggest costs are usually on salaries and building maintenance; and the more staff you have (the selling point of most private schools), the more it costs.

I’m no fan of expensive private schools - went to a comprehensive myself - but I’m a trustee of three very different educational charities, and of course I know how their accounts all work: and even at the most expensive private schools the biggest costs will be all the Latin teachers, all the specialist music teachers and choirmasters, all the sports teachers, all the housemasters and matrons, etc. etc.; and the buildings maintenance. Fees in that sector are expensive because the parents are paying for more, and more expensive, staff.

If you don’t like the idea that rich people can pay to get someone to teach their kid Ancient Greek, or medieval counterpoint on the organ, because you think that if the local comp doesn’t do it then nobody should be able to, fine! Just don’t kid yourself that it’s going to benefit anyone in the state sector in any way.

@MintJulia they're not all Eton, but when you're talking about distributing tax exemptions, it doesn't make sense to distribute them to those most able to pay. Although private schools offer some bursaries, on the whole they're funded by the wealthiest in society (whether they consider themselves wealthy or not if you have a 5 figure sum spare each year you are)

I know plenty of people who earn more than me and send their children to state school. In fact I earned the same as my state school teacher brother when my DS1 started at private school. Do you consider him wealthy?!

@Dibblydoodahdah because it's not about wanting what you've got, teachers or otherwise. Some people like myself are a bit dubious that it's better, let alone 'elite' from the best of the state sector, which is fantastic where it works well. It's about where taxes and tax exemptions should go and doesn't make sense for them to go to private schools when we have poorly funded state schools and support for children and young people across the country.

@yazo All of the teachers in ds' independent school have QTS, and many come from the state sector. We had five new appointees in Sept, Three from U.K. state sector (one each, maths, physics & PE) and two language teachers (Spanish & German) from overseas.

@yazo but it’s going to raise very little money for the state sector. It won’t raise the £1.7 billion Labour have said it will for a start because schools will be reclaiming as much VAT as possible. Then there’s the children that will transfer to the state sector at a cost of £7k per year per pupil (not to mention capital costs of creating extra state school places in some cases). For the families that do keep their children in the private sector, they will cut back on other discretionary spending to save money - so there will be less VAT paid on that spending.

It’s basically a vote winner aimed at a certain sector of society in the same way as Brexit was going to reduce immigration. Those of us with an ounce of intelligence knew that was total bullshit and this is the same. I can’t believe that you as a teacher are falling for it! It will be the poorest children that suffer the most when they are pushed out of the best state schools and it will make private schools
more elitist.

@The6thQueen cant understand what you mean about pharmacies, they’re NHS contractors the same as GP practices? GP practices are also private businesses what is it you think they should be paying VAT on that they don’t currently? Hospital pharmacies are all run by hospitals. Some hospitals have a branch of a community pharmacy inside for out patients, that’s not a hospital pharmacy, in the same way as they have branches of costas, WH Smith etc.

But the lack of funding for state schools is a government policy? Charging VAT on private school fees isn’t going to make any kind of measurable difference to the state sector and probably won’t even go anywhere near schools funding (we have very few taxes in the U.K. which are hypothecated, and I’ve seen no evidence that Labour would hypothecate this extra VAT intake for education.) It’s just purely a policy to attract voters because they think it sounds like it’s against the rich. It’s a dog in the manger policy, essentially, no?

If you really wanted to raise money for state education, you’d be removing tax exemptions from real profit making companies; raising corporation tax; taxing energy companies’ profits; or even reducing all the massive grants we hand out each year to privatised transport companies just so that they can deliver big profits to their shareholders. You wouldn’t be making martyrs out of small prep schools for VAT pennies, would you?

Partner works in one of the most expensive fee-paying schools. He has a PGCE and state school experience - while some of his colleagues also do, many others don't but do have doctorates in their subject. Being very knowledgeable about a subject doesn't always make you the best teacher. (I knew that before hearing him rant about it...)

Oh and as for it not being better than the best of the state sector, well it depends on what you are looking for. My DS1 is at a top ten state school. The academic results are definitely better there than at DS2’s private school but the private school offers a lot of other things that the state school doesn’t. My DS2 hates noise and big groups of people and suffers from anxiety. There are no state schools in our area that can offer him small classes and a small year group as well as an on-site counsellor. I value his mental health far more than I do exam results.