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.

The difference between schools and university’s is interesting. A university is a genuine charity, a private school is not.

A private school meets the need to provide mandatory schooling to your child.

A university is a charity due to its research work. They exist to expand global understanding of the world and everything in it, and the publish their research extensively in order for others the world over to help promote the development of knowledge. Yes they teach some people things as part of that, but it’s not mandatory to go, and they are teaching with the aim of producing researchers that will solve the worlds problems, not cause Tristram wants to spend 3 years propping up the bar in a students union. Speak to any academic and research is why they do what they do, not teaching.

Public schools (ie the most expensive private schools) ALL conduct research. Eton College produces more research on education (particularly on improving educational outcomes for disadvantaged children) than some universitities. So if we used research as some nominal differentiator then the filthy rich would still be able to keep their schools tax free & it would be the cheaper private schools that middle class parents use that would be targetted.

This is so true. We’ve already seen 4 new funds / scholarships become available in the selective secondary school of DS’ primary that are only available to pupils who went through the school’s primary. The Secondary has also started to offer deep discounts to parents who send their children up from Primary to keep them - proposals about keeping fees equal from preschool to 6th form are being considered too.

I send my child to a private school because he was let down by the state system, my friend’s son is already out of education by year 8 and she has an uphill battle to find a appropriate school setting. I was lucky to afford private but can not afford the 20 % increase so he’ll have to go back to state and have tutors and hope he’ll be fine and have his confidence destroyed yet again

@Knifeandforkwhocares
That might be your opinion but it’s not true in legal terms. Education, including teaching, is a charitable purpose itself. It doesn’t need to include research. Universities would still be charities if they did no research - there are some universities which only teach and don’t research like University of Law. Most universities have dual charitable objects of education/ teaching and research.

Education, which includes teaching in schools, has been a charitable purpose since the beginning of charity law.

The University of Law is for profit and not a charity. I think BPP is for profit too.

The thing is if they are going to suddenly tax some people with children in education money, why don’t they also tax those earning over 100k using state education, for example. What is the actual difference? It is a sudden stealth tax on high earning people with children. We are a high earning household with 4 children using state education- should we be taxed more? I would obviously argue the opposite because they will need our children to work hard and pay taxes in the future. Besides, rich intelligent people should be incentivised to have children, not the opposite?

I have taught in two private schools. One overseas and one in the home counties. The one in Australia had a true bursary system, that is, places given to genuinely bright state school pupils. Not Prep or tutored for 11 plus etc. They also had an allowance.
The one in the home counties only interviewed students who had gone to Prep and hadn't got into the exceptional grammar school. I spent considerable amount of time in Prep 4 preparing for Common Entrance exams
It didn't seem charitable or just. The Prep school use to 'charitable donation' of worn out equipment. In the end the local state schools suggested they just pay for a skip.

@Fleabane 🤣🤣🤣🤣 that’s a load of old cobblers if you believe that…..

We’d baked the 20% in to our calculations since the last election when this policy was first touted. What we hadn’t accounted for is our household bills increasing by £1k per month in a very short period of time.
No one could have predicted that…I’ve noticed people tightening their belts at DS’ private school in the past year. For example, Porsches being swapped for minis or other small cars. Disposable income has been eaten up by the cost of living crisis and this is an increase too far or some people.

Labour have stated they are not planning to remove charitable status. They will be making them pay VAT.

The UK Labour Party reversed its policy of scrapping charitable status for private schools, meaning they will retain some of their current taxation perks, while still facing increased charges if the opposition comes to power.28 Sept 2023

I’m just having a giggle at the pp somewhere in the early pages who said something along the lines of ‘Kier Starmer’s a lawyer, he wouldn’t have suggested it if he hadn’t already worked out how to do it”😂🤣. News flash - Tony Blair (previous PM & trained barrister) also tried and failed to figure this one out… stop trusting that politician’s policies are something they’ll actually stand by and effect, sadly it’s mostly just not the case!

One thing this is not is sudden

This thread is from May 2017
AIBU that VAT on school fees makes no economical sense? | Mumsnet

From the Labour manifesto that year:
"To aid attainment, we will introduce free school meals for all primary school children, paid for by removing the VAT exemption on private
school fees."

A lot of parents don’t have thousands of pounds a year spare. A lot of families have more than one child. The VAT would be on top of increased living costs (lots of families have mortgages for example), and on top of large fee increases last year because of inflationary pressures.

If things we so tight that we couldn’t afford an extra 20% then we would have deemed it unaffordable in the first place.

We are an example of the kind of people that can afford it now, but probably not the extra 20%. We budgeted for a 5-7% rise year on year, and have largely been quite a bit under that, partly due to benefiting from a fee freeze two years in a row because of Covid. Our spreadsheet is drilled down into the minute detail and the budget has worked for it. Ours will be out of private education by 2025 so this shouldn't affect us too badly even if it comes in straight away, but if we had years to run, a sudden 20% rise in the middle of that careful budgeting on top of the normal annual increases would throw us out completely and we probably couldn't manage it long term. I don't think we're that unusual.

How many schools do you k ow that are out there making a profit for shareholders?

@fattytum

"private schools are businesses, and it is right they pay VAT"

++*

Actually nurseries are even more of a business (no burseries, opening of facilities for free etc) than private schools.

Nurseries currently don't charge VAT on their fees - is it right they should pay VAT?

The thing is, neither of these are all schools. For instance, my daughter's school (in London, high achieving, sought after) has a genuine bursary system in that all the child has to do is a) pass the entrance exam and b) need the financial assistance. They say they have never turned away a girl who did well enough in the exam to be offered a place on financial grounds (I have no reason to disbelieve them) and spend a lot of time and energy fundraising for bursaries. They run tons of charity events every term and the funds raised are for the bursary provision (split evenly with a charity chosen by the girls).

They most certainly aren't only interviewing only students from prep schools based on what I know about previous schools my daughter's friends attended (she also came from a nice but ordinary and definitely not particularly high achieving state primary).

They have a strong programme of support in place for local state schools which includes enrichment activities, help with university applications, interview preparation for university entrance, summer schools, joint activities like music and lectures and conferences, helping with MFL and reading in primary schools, revision courses for exam year students, mentoring, work experience opportunities, swimming lessons for primary school children, hosting swim galas and sports events etc etc etc. They work closely with other schools nearby to provide activities and opportunities that are genuinely beneficial. They are often (esp the lectures, conferences, university and music stuff) exactly the things that some people are choosing private schools to access.

It's not all schools obviously but many schools are genuinely trying to give something useful to their local communities.

I do get tired of the lazy idea that schools are just paying lip service to this stuff. Some are doing a lot more than required.

@BonjourCrisette ,

You are right about some schools; Westminster is aiming to go ‘needs blind’ by 2050 and invite partner school children to A level extension classes.

This is how it should be.

However, these schools are rare. The vast majority only pay lip service to their community obligations.

But if you are taxing “rich” private school parents why not tax rich state school parents? Plenty of 200k plus parent households in the state sector too?! And then actually use that money towards state schools.

Also, why not get rich pensioners to contribute to the NHS? Why is my rich mother getting a £3000 hearing aid for free and free bus passes etc when she is richer than most families living in London? And yes she does pay tax on her final salary pension scheme. However, she gets so much for free. Why is that?

Why should a parent on a smaller income with a SEN child in the private sector suddenly have to pay a huge extra whack of their income towards private schooling? It is not means based the policy because it makes it simpler to administer for them, but it is not fair by any means so it is disproportionate. And hitting children and families is never acceptable. Especially given demographic challenges of elderly population and not enough children being born. It makes no sense to me at all.

Ideally private schools should charge parents based on their level of income and assets too - some Steiner schools in Europe do that. They contribute based on means and size of family.

I think there used to be a 50 per additional tax rate after the financial crisis. After that Labour lost. However, maybe they should just have exemptions in the VAT legislation so only people in this bracket pay the VAT on schools fees? It is still too simplistic as a family may have 5 DC, but better than just whacking it on everyone.

“You are right about some schools; Westminster is aiming to go ‘needs blind’ by 2050 and invite partner school children to A level extension classes.”

Does Westminster School have a huge endowment like Eton College? Eton has over 500 million producing over 30 million income a year (will be more with higher interest rates) - that is how they can do these things. That is exactly how rich US unis do it too. They have a pot of money that makes the income which they can then use towards charitable purposes. Most private schools do not have that huge luxury, they are spending every penny on salaries and maintenance of old buildings and heating etc.

Should Tesco charge based on your income and assets too?

I wonder how many people would bother to have a job and savings in those circs

In addition, what is the plan for some of the old historic schools which may go bust? Will the National Trust take them over? Or will they just be allowed to fall apart whilst it takes years to unwind the charitable trusts? Will there be emergency funding for the listed buildings in such schools?