Eton in line for £4.8m in windfall from VAT recovery

[HooverIsAlwaysBroken]

https://www.telegraph.co.uk/money/jobs/schools-universities/eton-claim-48m-vat-clause-labour-private-school-tax-law/

i know that many people are fed up by this topic, so feel free to scroll by.

But for those who are supportive of the proposals, even though it has impact on children with SEN and military families…. Are you equally supportive of tax payer money funding swimming pools and boarding houses at the elite schools?

Am I being unreasonable in thinking that this policy should be properly looked into and assessed before implementation?

New data shows it's going to cost Foreign Office over £1million this year, before any revenue comes in.
There are now 3 x separate legal challenges.
Teaching union, headteacher unions, accountancy firms, IFS (who wrote the 1 report Labour based this policy on), SEN charities, military family representatives have all told Labour to pause or stop the policy. Labour refuse to listen and instead, Phillpson continues to post divisive and petty comments.
Everything some of us said would happen, is happening.

I mean, that’s how VAT works ( if you charge output VAT you can reclaim input VAT) so any school that has made major capital investments in recent years or continues to do so will be able to claim back the VAT they’ve paid on them. The larger the school, the more likely that they’ve done these big projects. But it does mean that the net VAT from Eton will be a wash for about 3 years

To be honest, I am just watching this unfold at the moment.

I don’t think it will raise any money overall, it will have a bad impact on some groups of children with SEN and on military families (we are neither but I feel for them) and some class sizes in certain state school will increase massively. Oh, and let’s not forget children whose parents did not budget for a 20% increase and have to leave the school in a GCSE / A-Level year. But all good because it is ideologically sound and it will all be good in the long term.

Now it appears that truly elite schools such as Eton gets taxpayer money for their amazing facilities. This will also amend itself in the long term. In the short term, it is a nice boost to the richest in society. Everyone happy?

or should we just do a proper impact study and cost-benefit-analysis of this before implementing it?

Edit: sorry - my maths is absolutely shocking- actually Eton will owe about 13 million a year in VAT on fees ( 1300 students and 50k ish fees at 20%) so this input VAT isn’t really a big deal is it?

Many parents at Eton will have been able to afford to pay for fees up front without VAT prior to July 24.

That is a good point. In the longer term it will be more equal, that is nice.

In the short term, for SEN / military families: do suck it up. For children at elite schools: hope you enjoy your amazing facilities, great that we could reimburse the VAT, have fun with the extra millions for now.

Eton is passing on the full 20% VAT so any monies they receive in return will be profit so yes, Eton is quids in.

That is really good to know. Hope they use the money to invest in even better facilities and excellent teaching. Good for them.

Well yes and no. The view they are taking is that that capital expenditure was over ten years and shouldn’t be used immediately to offset VAT for current pupils in 2024-5 at the expense of future ones. By implementing the 20% VAT on fees now and reclaiming the 4.8m on historic capex they can use the reclaimed VAT to benefit pupils over the long term. Eton doesn’t have any shareholders and can’t therefore make a profit ( it can only build a reserve) so the only people that can benefit are the students, current and future.

re school fees in advance, it’s very unclear whether these will actually be exempt from VAT beyond fees paid for the 2024-5 school year because of how these advance fee schemes are worded.

I hope you realise this isn't free money, but money they have already spent which can now legitimately be claimed back. That's how being registered and liable for VAT works.

What is idiotic is enabling them to claim back anything. If there's such a "black hole" why give anything back to make ot bigger?

Because thems the rules.

But that's exactly what happens when a company becomes VAT registered, they aren't "allowing" it to happen. That's the VAT legislation. Labour knew that which is why this whole thing is ridiculous

It's basic maths but this 4.8 mill will be covered in about 3 years of income from the school. Which isn't that long for a school that been going for over 500 years.

I hope no one from a private school couldn't work that out. I would be asking my old school for a refund if so 😂.

Don't be silly. It may take a year or three but it will happen.

Ahh thank you.

I am not entirely sure but I think this is a barb at my maths skills. I am state educated, clearly should have begged my parents for a private education 😂

You vote for muppets, you get muppets.

It is idiotic and all the rest as you say

But for those who are supportive of the proposals, even though it has impact on children with SEN and military families…. Are you equally supportive of tax payer money funding swimming pools and boarding houses at the elite schools?

This is just how vat works though. No different to eg a hotel charging vat on its rooms and reclaiming that vat when it builds a spa. By your reasoning that’s “tax payer money funding a spa”. Businesses pay vat on the goods and service they buy and charge vat on the goods and services they supply. Deduct one from the other and the difference goes to the exchequer (broadly). Not sure why the press are talking about this as if it’s some sort of surprise.

Year 1: Eton collects and hands over c. 13 million in VAT on fees to the treasury. It also receives 4.8 million in VAT refunds- net position treasury still gets 8 million. Eton likely puts the 4.8 m into some sort of capital reserve for future building projects.

Years 2 onwards: treasury gets the full 13 million of VAT on fees less any input tax that Eton is reclaiming- likely to be around 400k based on last 10 years plus bits and pieces on VATable supplies although these aren’t huge for a school whose main cost is salaries.

so the treasury is still doing quite well. It’s not like they’re getting nothing from Eton while other schools are being bankrupted.

I don’t agree with VAT on private schools but I don’t really understand the Telegraph article and think it’s somewhat misleading- especially as literally one years VaT on fees is 3x what they can reclaim on 10 years of capex.

The telegraph, mail, express, etc know that any story that casts a negative light on Labour will generate clicks and engagement, so they pump them out daily.

They also know that those stories don't have to be particularly robust or accurate as their readership is predisposed to dislike labour and are unlikely to challenge the narrative.

An update to the old saying should be "don't let facts get in the way of generating clicks"