Michael Gove proposes imposing VAT on private school fees

[OCSockOrphanage]

In an Op Ed piece for The Times today (Fri 24 Feb), teaching's Nemesis suggests that school fees should be subject to VAT at 20% so the revenue can be ploughed into improving state provision.

Link

Opinions? I reckon there will be a few?

Well I suppose the question is, what is going to happen about VAT post-Brexit?

My guess is that in the short-term, there will be some sort of enabling legislation that will roll it forwards to continue as it is in the short term. And that any changes will be made in a rather longer time-frame. So any/all of the points about how VAT runs as an EU tax will cease to be show-stoppers post-Brexit, but that does not mean they'll necessarily be changed straight away.

Reforming VAT is a pretty big task, but it could be attempted once out of the EU. I don't know how high up the 'Brexit to do' list it would come, and it doesn't seem to have the urgency of some of the other issues that will also need to be dealt with.

Parents could technically reclaim vat through their limited company - they could even claim a corporation tax deduction. it would be a benefit in kind (ie part of their remuneration package) for the director/employee, and as such would be an expense of the business, provided it was commensurate with the role being done. The employee would then be taxed on the vat inclusive value at their marginal rate (which is likely to be 40 or 45%) plus the company would be have to pay class 1a nics on the vat inclusive amount, so wouldn't be tax efficient in most circumstances.

I suspect one of the attractions is that private schools would have a relatively low input vat claim - many of their costs are zero rated, exempt or outside of the scope. Construction costs would be the main one, but any residential halls would be zero rated. With charitable status, I would imagine that a lot of construction would also fall into the 'charitable purposes' zero-rating clauses. I would imagine the output vat generated would vastly outweigh input vat claims.

meditrina although an EU tax, it is written in to UK law (VATA 1994 is the enabling act) so should carry on as normal post-brexit, until they get round to tinkering with it.

So far as I can tell, there isn't a great deal of appetite for huge vat reforms - it's a very efficient and arguably very fair tax and easy to collect. I suspect the most of what we'll see is shifting around categories eg zero rating feminine hygeine products, increasing/decreasing the rates beyond what the eu would previously allow.

And of course, people getting rather silly ideas about charging vat on school fees...

The schools this is most likely to put out of business are preschools and nurseries, surely?

20% increase on fees for those schools? Aren't they relatively expensive enough?

If this were to happen, then the private schools could always absorb the costs themselves and not pass it onto the parents.

Most small schools could not do this.

Most small state primaries cannot support budget cuts and yet their budgets are being cut. Why should the government be kinder to the private sector than state?

I am loath to agree with anything the odious little toad says. But...VAT is payable on luxury items and private school fees are not a necessity are they...so I guess he is being logical at the same time as being a complete and utter twat.

I can see where he is coming from but I don't agree at all. I don't believe for a minute that the VAT raised would go on improving state schools instead of being used to line the pockets of cronies who are running some of the academies.

I don't in principle object to be taxed on fees if the money is ploughed back into improving state education.

But the whole "proposal" is likely impossible to achieve and is just a way of generating attention for Gove who is an idiot.

"There are a few of the anti private ed on this forum who have a deep loathing of all private school parents"

I should think that the vast majority of people like myself who are strongly anti private schools feel that way because of the unfairness they create for children.

"But...VAT is payable on luxury items"

VAT is payable of items which fall within the rules of this EU general consumption tax

It is not and never has been a luxury tax.

I should think that the vast majority of people like myself who are strongly anti private schools feel that way because of the unfairness they create for children.

Partly. Also the way that they can make some children feel totally and utterly inadequate and produce children who think that they are in some way superior to others. DD is a member of a theatre group and many children go to private school at 11. She has seen countless lovely children turn into arrogant little brats who think that they are better than their state school counterparts. It seems to be one local private school in particularly that gives them this idea and it's very sad. Former friends have dropped her within a couple of months of starting at private school because she goes to a state school.

"Why should the government be kinder to the private sector than state?"

Because we haven't yet left the EU.

We simply do not have the leverage to attempt a VAT rule change. And probably didn't have the negotiator time to spare for it with everything elsthat's going on. And I can just imagine the response of other nations if the one leaving the club tried to change the rules which would then only apply to the members.

Sorting out a new successor tax to VAT will probably be necessary, but given what PP said about the 1994 Act letting the current system continue, I suspect that there will be other more urgent post-Brexit issues than this one.

"I should think that the vast majority of people like myself who are strongly anti private schools feel that way because of the unfairness they create for children."
Does anyone seriously really think that VAT on fees will impact on the super rich, the Sunday Times rich listers, oligarchs, or even the very wealthy? Of course it wont. It will only impact the middle classes. But maybe this is the solution to state ed, drive the MC back to it let them become involved in state schools; run PTS's, become school governors etc.

I do agree with noble although I do wonder how I'm going to afford it. I'll have to get another job or start up a business of my own.

Winnie I wouldn't bank on that anyway to squeeze money out of people. That's the whole point of Brexit they want control of what goes on in this country.

"Why should the government be kinder to the private sector than state?"
In what way are he government being kinder? Neither pay VAT. Just because funding for state ed is being cut it doesn't mean that the private sector should also be penalised.
This is not exactly a new idea it was proposed here in 2007 and I'm well before that I just can't easily find anything and an interesting debate here.

"Just because funding for state ed is being cut it doesn't mean that the private sector should also be penalised"

Yes it does.

Unless your aim is to widen inequality between children.

"Of course it wont. It will only impact the middle classes"

The vast majority of middle class people in the U.K. don't use private schools because they can't afford them.

In any case - why is it a problem if m/c people can't afford to use private schools?

Im sorry just don't buy onto the ethos of because I'm being hurt you must be too.
Secondly what about the massive inequalities in the state sector.
Or the massive inequalities in life in general? Are charge the MC's VAT on books or entrance tickets to museums/concerts or maybe tutors should charge VAT
Secondly the point Im trying to make is *minifingers" is that the schools who in most peoples minds perpetuate "institutionalised inequality" and educate "the privileged elite", they and their parents are not gong to be affected by VAT being imposed they will just carry on paying.
Price itself has a certain desirability and status to many.

It's not a problem but the MC's are not the elite who are perpetuating inequality and taking all the jobs or are in a position of influence and power.
"The vast majority of middle class people in the U.K. don't use private schools because they can't afford them."
I think many would dispute that certainly lots on MN paying. Until moving where we live now I didn't know a single MC family who weren't education heir children privately especially in London.

"Im sorry just don't buy onto the ethos of because I'm being hurt you must be too."

Do you agree on principle that we should strive for equality of opportunity for children?

If so, then you can't support government and economic policies which compound serious inequalities within our system of education.

"Secondly what about the massive inequalities in the state sector"

Yes - these also need to be addressed. Removing faith criteria for admissions to faith schools, getting rid of grammar schools, and switching to lottery based or fair-banding admissions systems would be a good start, and is happening in some areas.

"I think many would dispute that certainly lots on MN paying"

Only 7% of children go to private schools in the UK.

That's in a population where over 50% of people are engaged in non-manual occupations.

"The vast majority of middle class people in the U.K. don't use private schools because they can't afford them"

I think this is the wrong way round. Shouldn't it be 'the vast majority of people who use private schools are middle class' ? So those who have to bear any price increase will be middle class.

But I suppose they are the ones most able to afford nannies when private pre-schools start closing (because their fees are barely affordable now, even with vouchers and tax credits - which is a huge public subsidy to private schools) and house prices near desirable state schools, or tutors, or to stay home and arrange education other than in a school.

"Only 7% of children go to private schools in the UK."

Careful with that figure.

It's the headline one, covering all age groups.

About 20% are in private school sixth forms.

I'm not sure about the figures for pre-school years, but that's pretty damned high too.