Is anyone else worried about the effect of rising private school fees on state schools?

[BabyIcecream]

Where I live there already aren't enough school places. Three big state secondary's, one is catholic, they are all over subscribed and bursting at the seams using old buildings with not enough funding.

Ive seen reports that at some private schools upto a third of pupils might leave if the fees go up due to VAT.

I'm worried about all these extra pupils needing places, DS already finds his school overcrowded and whilst I don't agree with private education putting extra pupils into the state system is just going to further disadvantage our children.

Unless money raised by increasing private schools costs is going to be used to fund state education? Does anyone know?

But why would they? They are already paying for state school through their taxes

Exactly. I’m assuming that private schools have already taken advice on doing things just like this.

Not that easy. HMRC have "disaggregation" rules for exactly those scenarios. If they didn't loads of businesses would split themselves into smaller companies to avoid VAT. The rules include criteria such as having "common" customers, similar types of services, "common" ownership, administration and management, "common" equipment/premises/facilities, etc. So, no, highly unlikely Eton could do that and not fall foul of the rules. There've been loads of court/tribunal cases involving pubs where they've tried to separate the food/kitchen/restaurant (claimed to be run by the wife) from the wet/pub side of the business (claimed to be run by the husband), and mostly failed due to commonality of premises/facilities, ownership, customers, etc.

Reeves and Starmer should double check that holey Non Dom hatch job while they’re at it

I have no doubt that Starmer being a lawyer himself knows exactly that all of this is and was entirely unworkable.

However, since Trump/Brexit etc politics is not based on the advice of experts or facts, it is based on rearing up emotions in the general public and a very strange interplay of power with journalists, that I personally find very disturbing.

Most independent schools are companies limited by guarantee which are also charities or subsidiaries of charities . Most if not all will also have a trading arm for vatable sales for example some, but not all, lettings of buildings. ( for example a bare let is not taxable but with tea and coffee facilities it is) There is no requirement to charge VAT below the threshold but you may choose to in order to recover CAT on your imputs . VAT is a maze of case law and detail this us not a simple topic. Schools will be looking very carefully at how they can slice and dice their supplies and imputs to minimise the impact. There is also the distinction between exempt supplies and zero rated supplies a subtle but critical difference .

Really? I work in HR too and we wouldn't even look at what school someone went to, it's just best person for the job.

There isn't a 'state' alternative to fee paying universities 😉

@cupofdecaf May be some parents are off the local state schools due to knife crime violence and not only about the state of the academics . I know of many families who would rather leave than enrol their kids to schools rife with gangs. Even Diane Abbott stated this reason for sending her son to private school. I am up for great state schools but how do you control that bit that went out of hands in some schools in urban areas?

It’s not a legal requirement to attend university though. University hugely improves a person’s life chances, and often only the privileged children can afford to attend now.

It is, however, a legal requirement for a child to receive an education until the age of 18. A lot of parents, especially those with children with additional needs, have been failed by the state system. There is no state alternative for those children (and the LEA funds private places for some of those). Why should those parents be penalised?

The assumption is that schools would pass the VAT increase on to their customers. They are businesses and businesses don't generally do things that will put themselves out of business. Schools with customers who are rich enough to absorb the increase may well pass it on, but those with poorer customers will have to absorb it themselves.

If this actually worked, then literally every business providing goods or services would do it. They don't, because HMRC are not the dolts you take them for.

Our experience: it was about survival and walking away from life-long trauma induced by relentless bullying they experienced during 8 years in the state system.
@MarshmellowMoon - there are many parents in your situation where the state has failed your children and the council has failed you too, because they should be paying for a safe place for your children in the interests of society as a whole.

Poor child with ADHD/autism born into poverty/poor parenting/crap schools leads to an adult in the criminal justice system/on benefits/generational trauma - potentially producing more kids like that, the cycle goes on. Everyone suffers.

Middle class kid with similar profile but better off parents who can pay and get the therapies and extra nurture leads to a more functioning adult, also with challenges but there is some hope for them. Leads to a better outcome for the whole of society. The state should be paying for your children to receive an education that is safe for their mental health! Especially a Labour government.

@BCCoach - and you are a tax specialist who has spent hundreds of hours pouring over “GuidanceSport supplies that are VAT exempt (VAT Notice 701/45)” and all the associated case law??!

As @cyclamenqueen points out, some of these private schools have significant turnover and 1bn endowments. I think they know how pay to get the right tax advice to make sure whatever government cooks up, they are going to be just fine.

The more likely scenario is that they’ll use a third party provider for the service who will bill the parents directly and may not have to charge VAT. Lots of extra curriculars are provided by third parties at my DS’ private school (e.g. music, gymnastics, golf, karate, horse riding). The visiting music teachers also teach in state schools and privately out of school. It would be absurd if only the lessons they give in private schools attract VAT.

So as I said the income tax rate in the UK is not 50%.

@MarshmellowMoon ·- I am very sorry to hear about your children. However, why are young paying out of your own pocket?

I have several friends with children with autism - the council is paying for their private education. Admittedly, these friends are either lawyers or have PhDs from eg Oxford. They knew how to appeal and get through the system. 2 of the kids are very intelligent but had severe mental health issues and school refusal in the state sector.

Did you go through the whole process to Appeal to get funding?

It appears we need more charities helping people to force the councils to get the funding. And they need to be obliged to stick to reasonable deadlines and if they don’t = compulsory payout.

Lots of extra-curriculars are provided by third parties in all schools. I don't see how this is some kind of gotcha. The proposal is to charge VAT on the school fees, not on random third party providers who have their own arrangements with HMRC.

What really makes me angry about Labour’s proposal is that the most expensive, elitist private schools will not be significantly impacted by the VAT policy. They have huge endowments to provide bursaries, the option of reclaiming VAT on the expensive facilities they have built in recent years and many of the parents are super rich so an extra 20% is not an issue for them.

It will be the schools like the one I am going to visit next week for my DS that will suffer; very small with pupils largely made up of those that couldn’t cope in state schools or bigger independents due to SEN, anxiety etc. It’s just what my DS2 needs as he struggles with big groups of people and very noisy environments but I’m not going to be able to go for it as I know that the risk of it closing in the future is too big, particulary if labour bring in this VAT policy. So DS2 will
most likely have to stay at his current independent which is bigger and a much safer bet in the long run. Yes, it has better academic results but that’s not my primary aim…I just want my DS to be safe and happy.

Never said it was a gotcha…just more evidence of how difficulty the policy is going to be implement in practice because private schools don’t just teach maths and English.

@Araminta1003 apologies, I thought you were suggesting that schools could get around it by literally charging for every lesson via a separate services company. Yes, I'm sure that they could contract out specific services, such as sports provision if they wanted to, but these would have to be to fully independent suppliers otherwise it would be considered business splitting.

@Dibblydoodahdah It's not evidence of anything. Supply of services by external providers is something that pretty much every VAT-registered company in the country already deals with.

But as I said where is the gotcha?!! I was merely pointing out one way that private schools may look to reduce the VAT burden for parents. It’s going to be challenging to get the drafting right. There are many services that private schools provide that won’t necessarily attract VAT. For example, is after school care going to be VATable in some settings but not in others?