More than private school fees will be affected by VAT

[MyNameIsFine]

Don't actually know if I'm being unreasonable here, interested to know whether this is true or not. Will the VAT on education also affect holiday clubs and afterschool clubs?

If it is free (state education) it is outside the scope of VAT.

Yes, it is, but is the after school swimming club also outside the scope of VAT? Labour has said that it is 'closing the loophole', which implies that the VAT exemption on education is still in place, right? So what education is exempt? What about school trips? Do parents with kids at state school have to pay VAT on school trips, or only the parents of kids at private school?

State schooling isn't classed as exempt. It's outside of the scope. Because it's not charged for. State school trips are at cost or below cost so they are outside of the scope of vat. Being 'exempt' and 'outside of scope' are different vat classifications. (It is really confusing, but it's important).

No, because you aren't charging for a service, so VAT can't be applied.

But that's just the question - what is outside the scope? Private schools add on the costs of school trips to the basic fee. Will the school trip also attract VAT? It's exactly the same school trip that the state school down the road is going on. Museums and outdoor pursuits centres don't have a 'luxury' offering for private school pupils. Bus and coach companies charge private school groups and state school groups exactly the same for busing them to the same activity. The school charges these at cost or below cost as well.

I would've loved to do Latin. It's really useful for understanding languages.

The basic premise is that if you are providing goods or services 'for a consideration' (usually money, can be something else of value) and your annual turnover is over the VAT threshold, VAT is added. Additionally there is the concept of a 'main supply' - this is the main thing you are providing, and additional services are subject to VAT in line with the main supply. My assumption is that this is to stop people splitting stuff right down to avoid charging VAT on things.

If you are not providing goods for a consideration, this is 'outside of scope'. This is why state-provided education is not vatable, but private education is - the fees are the 'consideration'.

If you are charging for things, you are withing the scope of VAT. Private education is within the scope of VAT. The VAT category is currently 'exempt'. Anything considered part of the main supply is also exempt.

If the VAT category changes to 'standard', anything which is currently part of the mainly supply will also be subject to standard VAT.

There is a lot of fiddly bits around the edges, but there always is with tax. The main premise is really straightforward but the detail is tricky. That doesn't make it badly thought-through - that's just the nature of VAT.

I do hear some Labour politicians talking about this policy in a way which suggests they don't fully understand VAT, which is unfortunate, but most people don't understand VAT. The people writing the detailed legislation will be experts on VAT.

DS used to go to private nursery which we had to pay fees for. When he was 3 we weren’t as happy with the provider so switched to a pre school which happened to be part of a private school. He could have stayed at the nursery for pre school element but as I said we weren’t as happy with the nursery at that point.

All the tax breaks/funding for us as parents were available at the pre school. In fact us was marginally cheaper than the old nursery. So on paper there was no difference from the service being provided.

So under this new policy would they be treated differently as one is a private nursery and one is a private school? And if so why? Charitable status has nothing to do with this, and we weren’t actually being elitist as we were getting a cheaper service (and we needed childcare as both parents worked)

The nursery element might be categorised differently. It's like shops selling children's clothes and adult clothes apply different VAT rates (you don't see it because it's not usually broken down on the receipt). I'm not sure how private nursery care is treated for VAT.

I assume nursery falls within education

HMRC's VAT education manual says if Ofsted-registered, private day nurseries are exempt as a supply of welfare providion: "The provision of a day-nursery is a business activity. If the provider is registered with OFSTED, which is most likely as there are few exemptions from registration, then the supplies are an exempt supply of welfare services, as they are being provided in a state-regulated institution (VAT Act 1994, Schedule 9, Group 7, Item 9 refers). Otherwise, the supplies will normally be standard-rated. However, if the supplier is an eligible body and there is clear evidence that the supplies follow an educational curriculum, exemption under Group 6 may be appropriate"

It would be exceedingly odd if private school day nursery provision were to be treated differently from all the private businesses providing daycare. If this is all about 'buying privilege', nobody asks in later life what form of daycare a person's parents went for when they were under 5.

This. Plus a lot of families will afford the extra 20% by cutting down on spending in other areas so ultimately the amount of VAT they 'contribute' will be the same.

Many private schools are Ofsted registered inc their nursery/pre school provision

Yeah, so my assumption is that the (non-compulsory) nursery part would continue to be exempt but the school-age stuff would change.

I see the private school parents and desperately trying some mental gymnastics to try to criticise this policy.

I'll say it again

Fewer than the IFS predicted will leave, demand for private education is highly price inelastic.

No, private schools won't stop doing bursaries or free lets to the community. Bursaries and scholarships are basically a business transaction anyway, those kids get great results and enhance the reputation and image of the school which encourages parents like you to send their kids there. For most private schools, bursaries are not paid from fees but from endowments. They'll need to keep doing all these things to retain charitable status.

No, there won't be a massive amount of pressure on the best schools in the most desirable areas, there will be so few children leaving.

No, there won't be house price increases in these catchments either, the people who send their kids to private schools already live in the nicest areas in town. No one who can pay on average 90k over 6 years for one child's education is making a financial decision to live in an area that is less than optimal for sell on prices.

No, it won't impact nursery, university, after school, extra curricular or holiday clubs.

Your mental gymnastics is very funny to watch, but it really is the most meaningless of rubbish.

Fewer than the IFS predicted will leave

The IFS predicted private school numbers will fall 3-7%. The numbers are already down around 3% this year and that’s before the policy is introduced.

private schools won't stop doing bursaries

Some private schools have already announced they’ll be stopping them.

They'll need to keep doing all these things to retain charitable status.

Around half of private schools don’t have charitable status

No, there won't be a massive amount of pressure on the best schools in the most desirable areas

Catchments for many desirable schools have already shrunk this year because of increased applications. State Grammar heads have warned about the effect of introducing VAT on fees.

Our school has already said it will end bursaries for new applicants from Sept 24. Only existing applicants will continue to receive them.

You are talking about things you don't understand.

@twistyizzy

Good luck paying even higher fees due to the loss of charitable status then.

The management of your school is pretty dense as well then, fewer people will want to go when the results dip,

@twistyizzy I also think you are making things up to justify your outlook

I know what I'm talking about, I'm absolutely on the money.

Jesus christ for the millionth time, Labour aren't removing charitable status! They scrapped that idea. If you are going to argue in favour of VAT then at least understand the difference between VAT and charitable status, one has nothing to do with the other.

You may think I am but I'm really not! Unless you call following research by economists and working with ENT, making things up!

Half of schools don’t have charitable status. Also, some private schools aren’t results focussed. Many parents pick them for the care and individually tailored education, not the exam results.

@Another76543

There are several reasons for the falling roles in private schools, the major one of which is that enrolment in all secondaries, due to the passing of a population bulge, especially in London which has a higher percentage of children educated privately.

Don't confuse correlation with causation.

Private schools in generally haven't announced stopping bursaries but in general they'll struggle to maintain charity status. The only real info I've seen on that here is from foot stamping private school parents. But if they do, enjoy paying higher fees and the school getting worse results, bursaries are not really are charitable thing anyway ( and they impact a tiny number of children).

"Catchments for many desirable schools have already shrunk this year because of increased applications."

Evidence of this? Or just saying it?

@twistyizzy

I know Labour aren't removing charitable status, but any private school with it will struggle to justify having charitable status without granting bursaries/scholarships. Therefore they'll lose their charitable status.