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.

They are not charities and therefore shouldn't take advantage of tax breaks made for charities. And yes I also believe in "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" - and getting rid of non-dom status and removing loopholes in CGT and IHT
Private education is only for the rich- if you can afford it you are richer than most

@Yazo and to an extent it doesn’t matter whether the policy is introduced now or not, a lot of damage has already been done. I have never known so many kids take the 11 plus for state grammar at my DS’s prep as they did this year. It’s an all though so the majority usually stay on. Lots of people openly saying that they cannot afford the fees for seniors because the 20% VAT will push them over the edge. I looked at another very small private school yesterday and other prospective parents were actually discussing at the open day how they were worried that the school wouldn’t survive if VAT is imposed. There is nothing elite about that school. It’s full of children who couldn’t cope with state school or larger private schools. Lord knows what will happen to those children if it does close. Maybe they will end up at an Outstanding comp like my niece who is getting stuff thrown at her by other pupils in some of her classes! Oh well, I’m sure that the VAT generated can be used to deal with any mental health issues they suffer as a result.

I wonder whether Starmer still feels that we should rejoin the EU. VAT on education would have been illegal before we left.

The VAT exemption has nothing to do with charitable status. Please educate yourself.

The fact that this is Labour’s flagship policy tells you everything you need to know. Talk about re arranging the deckchairs.

At the next GE, one set of clowns will be replaced with another.

This is so true. The fact they have focused so much on this is very worrying. It means they have nothing else…

Will Labour be promising to put Capital Gains Tax back up to the same levels as Income Tax (less indexation) like it used to be then?

Honestly and just where do you think the money will come from to pay private school teachers moving to government schools?
I can’t understand how anyone thinks all these kids in private schools in theory moving into free government school places are going to be funded.

Right - well, they currently ARE charities; so you saying they aren’t doesn’t make much difference to that. I’m willing to bet there are lots of different kinds of charities you’d disapprove of, too, and which have not a great amount of what you might consider public benefit; so are you planning to vet them all?

And private education really isn’t only for the rich. There are many more small private schools that don’t charge massive fees than the big famous ones that do.

Are you genuinely suggesting that, say, spending 10k a year on private school fees makes you “rich”? Plenty of people spend more than that every year on holidays and new kitchens and cars and so on, but wouldn’t call themselves “rich”. By paying 10k, they also save you 5-7k in public funding; so you’re not exactly getting a bargain by making it unaffordable for them just because of being chippy.

There are many more people like that than there are oligarchs sending their kids to Marlborough.

Why don’t we tax a few buy to let landlords instead?

The extra children bring extra funding,
It doesn't work like that @fattytum . The DfE has a fixed budget from the Treasury. Increasing the number of pupils will just decrease the per pupil funding.

and the extra specialist teachers being available saves the school money too
What makes you think that they'd want to?

Why would, say, loads of surplus Latin or music teachers suddenly exiled from the private sector be a good thing for state schools? With no budget to hire them and no Classics programmes for them to teach or instruments for kids to play on? It’s just deluded to think that it would be good for the state education if lots of children left the private sector to go into the state sector. There would be less budget per child to go around, plus more pressure on resources.

I long for a decent government and a fairer, better economy - but this is just a really bad policy, based on an appeal to inverted class snobbery rather than any improvement it would deliver to state education. As a pp says above, education is not something we should be taxing right now. We should be taxing unproductive wealth hoarded in assets, tackling rentierism, redistributing housing wealth. It doesn’t make sense to tax education - we need more of it, not less.

It’s just an appeal to pure inverted snobbery; and it seems to rest on a rather nasty desire that some other people’s children should be unhappy and punished so that a few toffs don’t get to Eton. Bear in mind that many kids in the private sector are there purely because the state sector is not a good fit for them, because of SEN or a whole lot of other reasons — or because they were unhappy in a state school and there was no other viable alternative.

For every genuinely rich aristo heading off to Roedean, there will be other kids who were bullied at a previous school, or have dyslexia, or another reason why they are in private provision. And I’m pretty uncomfortable with a policy that doesn’t really do much aside from make a few kids unhappier — because if you think it’ll bring in loads of money, that the genuinely rich will be affected, or that suddenly they’ll stop getting all the nice high paying jobs in the city — or that state comps will miraculously suddenly be teaching Classics and rowing — then you’re really just kidding yourself.

It’s so weird to me that no one has considered that private schools are not obliged to pass the full cost equivalent on the parents. They could operate more efficiently, maybe reduce the fancy stuff and therefore not need to increase the total fees by 20%

We are always told that many other institutions must find efficiencies etc. Feels like this should be part of of the conversation too from private school leadership.

Airy assumption that teachers will move to the state sector - most won’t. The best will remain in the fewer remaining fee-paying schools and the rest will find other jobs. So teacher recruitment will be even harder because of the increased numbers in the state schools will making teaching in them even less desirable than now.
The PP who said this is an envy tax was right.

confused about why you think you are more educated and resourceful than other state school parents?

Well I’ve listened to presentations from two headteachers of two different schools in the past week and both have said that the schools will be doing everything they can to reduce what they pass on to parents (e.g. by reclaiming VAT). The problem is that the smaller schools have a lot less flexibility to do this. They will be the ones that close. Also, reclaiming VAT means that Labour’s £1.7 billion figure is wrong. They won’t net any where near that amount.

Off topic but to the comment about 10k a year ?
where are these schools 😂
30-40k a year here !

@Morechocmorechoc there is no way I could ever afford private school for both my SEN children but does not mean we are any less capable than you.
most parents of SEN children are aware of everything you discussed.

We have considered it it’s just that we know already that many schools have very small margins as it is, particularly with the impact of energy price rises and inflation. There isn’t anything “fancy” to cut, besides maybe the classroom temperature. Because the reality of private school isn’t like the fantasy people seem to have in their heads.

We pay £14,850 per year (for prep). The senior department starts at £21,000. That’s the South East. Average private school fees across the UK are around £15,200.

@Imjusttootired I'm very confused by your post, i assume you quoted the wrong person. My post on the first page refers to the stupidity of both Conservative and Labour politicians who create policies to get votes, above helping the country.

Nothing in my post regarding sen kids. Just the welfare of all kids in state schools who will have less provision and bigger classes. I certainly didn't say my kids go private either!

We have considered it it’s just that we know already that many schools have very small margins as it is, particularly with the impact of energy price rises and inflation. There isn’t anything “fancy” to cut, besides maybe the classroom temperature. Because the reality of private school isn’t like the fantasy people seem to have in their heads

My kids go to private school, albeit in slightly strange circumstances. I know that some are very fancy! But I agree they also vary massively.

So if the only thing to cut is the heating, what does the money actually go on? The service offer might need to change.

I do agree that it will not recoup the £1.7 Bn. It seems a reasonable enough policy to me, albeit not one I’d choose to prioritise above all costs at the moment.

Well I’ve listened to presentations from two headteachers of two different schools in the past week and both have said that the schools will be doing everything they can to reduce what they pass on to parents (e.g. by reclaiming VAT). The problem is that the smaller schools have a lot less flexibility to do this

I wasn’t really thinking of VAT claim back. More that they may need to adapt in the way that is expected of many other organisations in terms of innovation, service offer etc.

Charity status and VAT are two different things. I think charity status is actually hard to discard, and doesn’t confer a meaningful advantage anyway.

OTOH, it is hard to see private schooling as anything other than a luxury.

As someone up above said, the actual VAT cost is around 15%, not 20%, as they can reclaim 5%. In reality, they can pass on some of it and find savings for the rest. State schools get around £5,200/pupil/annum. You can add about £3,000 for buildings, which comes from a different pot, but you can still see it is a fraction of what private schools cost.

As to where savings could be found, have a look at the size and salaries of the SLT. Do schools really need a marketing department at all, let alone a large one on large salaries? And then there is the constant facilities upgrades, luxury sixth form centres, professional staffed theatres, climbing walls etc etc

Legally, OP, you are right, how could you apply it to private schools and not tutors, for instance? I don’t think that is insurmountable, though. And nor would it be hard to grant exceptions to special needs schools.

Yes they are? That's an odd comparison.

Private schools have exams to enter and cost money, unis have exams to enter and cost money.

They are Charity and have given us free education for a financially hard period of time due to their charitable status, they also give free places yearly to 5 children.

They open for local events, support the local state schools with cross country events and swimming and give back as much to the community as possible.