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.

Yes and as I said the smaller schools have a lot less flexibility to do that. For example, if a school only has one class per year group it can’t cut back the number of classes and make the existing classes larger. If a school has three classes per year it can.

Whatever Labour says now about private schools and tax, if in power they will set about dismantling them. Angela Rayner said “And we will set that Commission to work on making the whole education system fairer through the integration of private schools’.
If they are planning on integrating them then they will also have to requisition the private schools’ buildings and facilities.
That won’t be totally fair either. Children going to the state schools which were once Eton or Marlborough will have far better facilities than most other schools.
These buildings also cost a fortune to maintain so that will have to be paid for - though maybe Labour will knock down medieval buildings and build modern ones which are more practical.

@The6thQueen Sorry to derail, but where are you getting the idea that most pharmacies are charities . Several are privately owned eg Day Lewis but are not charities.
Are you confused by prescriptions not attracting VAT which is nothing to do with charitable status. It is unwieldy but pharmacies pay vat on medicines bought. from a wholesaler and reclaim it when they do their vat return.
VAT is payable on medicines purchased over the counter but not on scripts.
I was a pharmacist for over 40 years in different roles but can’t think of a pharmacy run by a charity.

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

At least 80% of a private school's outgoings will be on staff costs, which can only be cut by changing the main thing that differentiates a private school from a state school - class sizes and specialist teaching for different subjects. Also means that 80% of the outgoings aren't vatable and therefore no VAT for the school to reclaim to reduce the VAT charged on fees. Margins are tight.

@Labtastic ,

That is a bit of a simplistic way of looking at things. Class sizes (senior) are only about 20% smaller than state, yet income (in schools I know) are nearly 3x as much.

Staff includes a massive and overpaid SLT, marketing department, theatre technicians etc etc.

In addition, that is 80% of fee income. They also raise money from parents for expensive projects, so it is a lower percentage of total income.

Labour winning is not a done deal. A lot of things happening in the world would go against them soon. The pitfalls of this policy will be dissected property later in the campaign. I really doubt that even if they are elected this would go ahead. KS would make a fool of himself answering questions on this VAT proposal.

No, they will not be charging VAT on fees, just like all schools across the EU, where education delivered by nurseries/pre-schools, schools or universities is exempt

Not zero-rated, but completely exempt - ie outside the scope of VAT completely.

It is this exemption thar Labour plans to end, because since UK left the EU, we can now do that. They have not yet said whether there will be a new exemption for eg nurseries/preschools and universities, or if they will be included but zero-rated

I've always been dead against private schools. Yet PIL are now paying for DDs school fees as she couldn't cope at state school. She is going private due to the quiet small class sizes and good SEN provision.

It's shit that kids / grandkids of wealthy people have access to a better education. But unfortunately at the moment if you "level the playing field" you level it to the currently crap level of state schools - huge schools, large classes, lots of disruptive behaviour, NQTs being hired then fired annually to keep costs down...

It's a really difficult complex issue to fix, hence the headline grabbing VAT. But the way to level the playing field is to make state schools as good as private schools in the ways that matter.

My niece for example, with anxiety and dyslexia, goes to a small private school in the north of England which costs around 10k a year. Her parents earn a decent income for the area, but aren’t “rich”. They genuinely have given up holidays and so on to send her to her school. Yes, it’s a lucky position to be able to; but what kind of social justice agenda would it serve to make my niece unhappy in a state school which can’t really provide for her, merely because of a fantasy about somehow getting one over on the rich? There are a lot more of these schools and kids than there are the top public schools, which would carry on regardless.

This isn’t a policy which is going to improve state education. It’s merely a kind of revenge on the rich populism, when a much better policy would be a rethink of state education provision overall and big rises in schools funding, ideally paid for by taxing property and actual corporations.

The real elephant in the room of the U.K. economy is a vastly overinflated housing market, which has sucked out productive investment and massively affected living standards for younger generations. Fiddling with populist envy policies, rather than addressing the deeper issues, does not make me think Labour have a grip on the real economic problems we face.

This is a really interesting perspective, thank you. I hope it doesn’t happen.

The 30-40k figure will be for boarding schools, not just private schools.

and incidentally it’s likely the schools will start to bill the teaching and boarding side separately- as the gov won’t be able to charge VAT on boarding fees.

so these large elistist boarding schools will more or less continue on as before - and continue to get influx of VAT free donations from super rich.

having said that i know a boarder at a v top boarding school. He comes from a toxic home life, lives in a crowded council home and has SEN. He was offered scholarships to board at some of the top schools in the country due to top grades.

I think it's an important point also worth noting that some so called 'trusts' getting involved in small private schools groups are not in fact charitable at all. They are using the word 'trust' to make parents think they are charitable and putting profits back in to the school; in fact when you dig, you will find these are fat-cat business people taking profits entirely for themselves. So it's worth doing due dilligence this. I have recently seen a few charitable trust buy-outs by Ltd companies posing as Trusts. It stinks. They are called 'trust' but when listed on companies house they are Ltd companies with shareholders... generally one! They have no interest) and for some, little knowledge, in the business of education and are flying by the seat of their pants pretending they do... while taking out large profits for themselves. These tend to be small schools groups, often the choice of parents who are saving hard to pay for education because they believe their DC need a smaller and more personalised setting - and it's very difficult to get to the bottom of these 'Trusts' accounts! Be warned if you are looking at a small private school I think.

Can you be in charge please

@Daisymay2 I haven’t said pharmacies are charities. Just that healthcare, including pharmacies don’t pay VAT. This includes all private healthcare providers. Private pharmacies don’t pay VAT, in fact there is a loophole which means they pay even less tax than NHS pharmacies.

My point being, if we start adding VAT to private education then it won’t be long before it gets added to all other private providers too, including post 18 education like universities and private healthcare providers, like the majority of pharmacies. That, or Labour won’t be able to raise anything like their promised 1.7 bn because there are too many legal loopholes/insurmountable legal battles.

ItsAllGoingToBeFine · Today 08:52
I've always been dead against private schools. Yet PIL are now paying for DDs school fees as she couldn't cope at state school

I hope you’re not still ‘dead against private schools’ as if so, you’re a massive hypocrite.

Yes, I have changed my mind a bit. Until I personally had need of alternative provision I'm ashamed to say I hadn't considered the fact that some parents sent their kids to private schools because a state school couldn't meet their needs (rather than wants).

I think that currently they are a necessary evil. In an ideal world every child should have easy access to a state school that can meet their needs. Unfortunately, I cannot see how that can be achieved.

‘My point being, if we start adding VAT to private education then it won’t be long before it gets added to all other private providers too,’

mmm, well let’s start with taxing private schools properly and take it from there, shall we? I’m up for that.

ItsAllgoingtobefine.
Thank you for answering my question

@Whereforartthoudave Could you provide us with a list of what kinds of education are Good and should be VAT-free; and what kinds of education are Bad and should have VAT on? What about non-school providers like the old National extension college? Further education colleges that offer a mix of A-levels and vocational courses? Special needs schools? Performing arts schools? At what point do you say that a talented poor ballet student has to pay VAT but a poor autistic child with an unusual aptitude for maths doesn’t? Or maybe they both should if they want an education that doesn’t exist in the state sector? Let’s make every kid that doesn’t fit state provision as miserable as possible, if their parents have the temerity to give up holidays to send their kid to a private provider.

Because we sure as hell know it won’t have an impact on Wills and Kate’s kids, and the kids of the other genuinely rich parents in this country. Nor on all the London parents who can afford £1m to buy a house in the catchment of a selective state school or tutor their kids for a nice grammar.

A policy that doesn’t really do what it is supposed to, but makes many children miserable along the way, is not what I’d call a good one IMO. What next, should we have means-tested VAT on tampons and books if you’re well off enough to afford them? That will serve the rich right, won’t it?

Angela Rayner said that when Corbyn was leader and the party was committed to abolishing private schools and redistributing their assets. I imagine that there are many in the party (probably including Rayner) who'd still like to do that but it's not what they're now proposing to do. There would be huge legal problems in doing that and it's much more unpopular than removing VAT.

There would be huge legal problems in doing that and it's much more unpopular than removing VAT.

Mia85 I agree there would be huge legal problems but surely it would only be unpopular with the 7% who privately educate their dc?
However it seems odd when Angela Rayner said about integrating private schools into state schools, that she hadn’t bothered to check on the legal ramifications.

Not all SEN children are in specialist schools. Some manage fine in mainstream private schools because of the small class sizes.

At what point do you say that a talented poor ballet student has to pay VAT but a poor autistic child with an unusual aptitude for maths doesn’t? Or maybe they both should if they want an education that doesn’t exist in the state sector?

Good points asterel. As I said in my last post, it seems odd that the Labour Party hasn’t thought of this. I suppose they want to be seen to have a go at private education in whatever way they can as a vote winner.

I don't think it's as simply as saying only those affected will oppose a change. On the current VAT policy there are some private school parents who think that's fair. There are other people who don't use private schools but who oppose the policy and went private themselves, or who have friends/family members who go or who value having the possibility of a more accessible escape route if things go badly for their child. Further, some people are concerned about divisive policies and the quality of decision-making.

On the Corbyn policy my recollection is that opinion polling suggested it was much more unpopular than the VAT measure. A plan to seize and redistribute private assets is pretty extreme as is an attempt to have complete state control of education. A lot of people would oppose such a policy regardless of whether they used private schools.

A plan to seize and redistribute private assets is pretty extreme as is an attempt to have complete state control of education. A lot of people would oppose such a policy regardless of whether they used private schools.

Yes seizing assets is the policy of a dictator. Did Angela Rayner think it would be a popular policy or was it just wishful thinking on her part?