To think taxing private schools...

[maddening]

I have no skin in the game, my dc is at a secondary state school. I have no strong views on private schools - although I think state should offer the same level for all dc.

However, looking at the maths I am not convinced the cost and benefits of this proposal works out - apparently vat will bring in 1.3 billion - however if the 554,000 children in private schools had to be schooled in state schools that would cost 4 billion - aibu to think this is not the win that many are led to believe? It is more divisive imo and driven by ideology.

If the private school parents are saving the state 4 billion a year then I don't have an issue with the vat personally.

I think that there could be more requirements placed on private schools in order to retain the vat free status, such as sharing facilities with local state schools and more subsidised places perhaps, or means tested vat relief for parents?

My friend worked in a school with the same set up. Most of the children came from abroad as well so wouldn’t go into our state system anyway. So subsiding wealthy foreign people who want an English education.

She was made redundant as a result of Brexit, I haven’t seen anyone mention that, easier to have their children in a European school for visits. They lost a lot of students over it, a Tory driven exercise.

I imagine the majority celebrating this ill thought out policy, would have a similar approach to this text exchange.

Always want something for nothing & feel entitled for others to pay more...so they don't have to.

Eh??

In which case it's probably set up as a business and already paying VAT

That's exactly how it works in Ireland, and it gives parents who aren't vastly rich a much bigger choice.

If it makes a profit, then it's not classed as a charity and already pays VAT, so won't be affected by the change.
The vast majority of private schools are not for profit and all moneys go back into education.
Labour's new policy is a great way of changing this - because there will no longer be an incentive to plough everything back into education (including bursaries for less well-off children etc). Once they're stripped of charitable status, private schools will necessarily become for-profit businesses. And no more need to make facilities available to local schools either.

I think if they price out all but the wealthiest of families, that drives an even further divide between the elite and the rest of us. It’ll become even harder to obtain and there won’t be much of a middle left. I’m not sure such socialist principles work in a very capitalist society

This isn’t true. It isn’t possible to charge VAT on education presently. It has nothing to do with charitable status.

Yes it has everything to do with charitable status. That's what the proposal is about, to remove charitable status from the schools that have it.
There would be no other possible mechanism to charge VAT on fees.

You are wrong. Education is currently VAT exempt that’s why private schools don’t charge VAT. Some private schools are charities, some are not but none of them charge VAT. The proposal to end charitable status was dropped months ago by Labour when they realised it was too difficult to implement.

https://www.bbc.co.uk/news/uk-politics-66942985

This is wrong. Labour have confirmed they’re not removing charitable status from schools. Charitable status and VAT are entirely separate. VAT would be charged by removing the current exemption contained in the VAT legislation.

Labour drops plan to strip public schools of charitable status https://www.bbc.co.uk/news/uk-politics-66942985

Private schools (charitable or otherwise) already pay VAT on goods and services they spend money on. This input VAT cannot currently be reclaimed because schools are not VAT registered.

This proposed policy is to do with the need to charge output VAT on school fees. Once schools are VAT registered and charging output VAT on fees, they can then reclaim the input VAT they incur.

VAT and charitable status are entirely separate.

Utter nonsense. I used private education and could see that charity status was a bogus thing. They are not charities. They are part of an unfair system that means two equally bright and deserving new born babies, born to parents with very different sized pots of money, will have very different chances in life. Whilst abolishing private schools would be one way to make it a more even playing field and a move towards a more meritocratic society, paying VAT on what is a luxury and always has been, is just putting right a wrong.

And when they become VAT registered can’t they start to claim that VAT back?

But I was saying that private schools are generally good schools which get the best from their students. It seems like you agree with that given that you think that if you take two equally bright students the one in private school will do better. (Of course the demographics of the students are different which accounts for some of the higher attainment in the private sector but leaving that aside).

The difference in our views seems to be that I think education is a good in itself whoever it’s provided to whereas you seem to think that it’s only a good if provided equally to everyone such that it would be preferable for everyone to get a poorer education than for some to get a poorer education and some to get a better education. That’s fine- it’s a political viewpoint - but politics shouldn’t really be allowed to tear up centuries of charity law (and private schools were some of the first charities so are hardly bogus - they are in some sense the founding charities).

The VAT exemption is mostly just EU law. But removing it is clearly intended as an attack on private schools rather than sound tax policy. If you want to raise taxes you don’t do it in a way which has such uncertainty in terms of pushing people to use state services instead. There are thousands of more obvious ways to raise revenue.

Yes but most of a private school’s input costs (teachers’ salaries) are not subject to VAT and so the schools will be net payers of VAT (even with reclaiming past VAT on building projects)

Yes, they can start to claim the input VAT back once they become VAT registered. I did mention that in my post. In the case of private schools though, the vast majority of schools will have input VAT far less than the output VAT, because a lot of their expenses are staff costs.

The whole thing is just depressing. It's very clear how much of an emotive issue this is and Labour have chosen to prey on this as an easy win rather than actually addressing the sorry condition of state schools. People can't even follow along that this has nothing to do with removing the charitable status of some private schools. The VAT raised will be a drop in the ocean of what's needed. Everyone with a SEN kid is now filing for an EHCP. Some of those will end with the council paying the full fees for those kids and the rest being exempt from VAT. In the end I'd be surprised if this adds much of anything. State schools will still be subpar. The UK still won't have invested in their own people and the divide will have grown bigger.

If subsequent govs invested in education then there would be little demand for independent schools. The fact that neither have has resulted in parents taking matters into their own hands. Now we have councils telling parents not to move their children because they don't have enough school places. Even before a possible influx of privately educated students, many secondary schools are oversubscribed with long waiting lists.

Vat and being a charity are two completely diffferent things.

schools don’t charge vat on their fees as education is exempt this is the same of it’s a non for profit school or a school run as a business with shareholders.

being a charity exempts the school from paying corporation tax on its surplus. Schools thst are already run as businesses pay this anyway now but currently don’t have to chsrge vat

And that's where you're totally wrong. Many people misunderstand this so you're not alone, but being exempt from charging VAT on fees is the ONLY tax advantage that classification as charities gets private schools classed as charities.

By definition, as charities they don't make corporate profits (they aren't corporations) so there are no profits to charge corporation tax on. All profits are re-invested in the school, including in bursaries for those who otherwise can't afford the school.

Education is exempt from VAT, yes, but only when provided by "eligible bodies", which includes private schools only if they are classed as charities.

The whole (stated!) aim of removing charitable status from all private schools IS to force them to charge VAT on their fees, just like any business. All of Labour's calculations are based on how much revenues they expect to be gained through VAT on fees. They don't claim that there will be any revenues from corporation tax - as none of these schools make a profit.

Hillarious that you are telling someone else that they are totally wrong. Schools
not charging VAT has nothing to do with them being a charity. There are loads of private schools that are not charities and none of them charge VAT because they are all exempt whatever their status.

And, no not all businesses charge VAT because not all goods and services are subject to VAT so it depends on what they are selling (and the turnover threshold of course).

I’m sorry, but you’re wrong on so many levels here. I can understand why you are confused though as the Labour Party took a while to realise that charitable status and VAT were separate issues.

Private schools are exempt from charging VAT on school fees, whether or not they are registered charities (around half aren’t).

The current proposal is to change the VAT legislation so that VAT becomes payable on fees. The plans to strip them of charitable status have been dropped.

Charitable status brings other advantages not linked with VAT (eg reduced business rates, tax relief on gift aid donations).

You’re correct with the corporation tax point.

In my experience the charitable endeavours are pretty minimal.

You're right, apologies, I'd missed that - I'd just taken Labours plans as previously announced by Angela Rayner at face value. But the end result is the same - the goal is to force private schools to charge VAT on fees. Which is counterproductive in so many ways and is going to end up costing the tax payer more than it gains. But oh well. Very glad mine will be out of school by the time it comes in.