VAT on private school fees

[user1486984759]

So I’m going to get crucified for this, BUT, let me get this straight:

• We pay 45% tax, thereby funding state schools
• We do not get any benefits, and those that do get priority when it comes to state school admissions
• We scrimp and save from what’s left after paying 45% tax to pay for our kids’ education
• And now the state is going to add 20% to our school fees to fund state schools
• So we pay the most to fund state schools, but when it comes to state school admissions, we are last in line

How is this fair?

It seems that in this country, the best places to be are (1) a non-dom billionaire, or (2) someone who doesn’t pay taxes, gets all the benefits, and gets priority in state school admissions. The hard working PAYE earners are screwed by parties from left, right and center.

I picked up in this thread on people arguing simultaneously that private education in this country produces better educated people, and those that tend to rule the country. In the same breath pointing out how unintelligent our leaders often seem to be, how stupid and unexamined and short term their decisions - sentiments I would tend to agree with - but you can't have both be true.

Actually, I believe both can be true given the type of personalities that seem attracted to politics. Private education may, on average, produce better educated people. But our leaders may not be the cream of that crop.

No VAT for kids with EHCPs... that could get very interesting

By my understanding, the IFS did not look into the technicalities of applying the VAT. It was simply a report on whether the parents would pay. It also included discussion about removal of charitable status which has now been dropped because it is unfeasible.

Interestingly boarding accommodation, after school care + transport are in different categories to teaching SO in theory private schools could just charge VAT on core teaching hours but then boarding and "after school" (extra curriculum stuff) would be VAT exempt.
I think private schools will have worked out a plan with their lawyers + finance team to split up certain parts of their provision if needed.
As a PP has said, the more exemptions (SEN etc) are put in place than the greater the number of loopholes can be found. It will just end up as 1 big mess.
Plus it all has to go through parliament and a significant % of MPs on all sides send their kids to private schools.
There is also a possibility that if parents could pay fees in advance then they could prevent paying the VAT to some degree.

Loopholes the fanciest private schools in the country will exploit to ensure the majority of what they provide is exempt from the extra VAT.

What you are describing is tax avoidance.

@SabrinaThwaite just like many, many large multi national institutions and private individuals in this country. Don't see Labour going after them!

And this does not exist amongst the biggest companies who earn billions in profits?!! You are living in a fantasy world if you believe it does not already exist

Closing those loopholes would earn far more than this ridiculous policy ever will, funnily enough, no party has expressed intention to do so

No, the IFS report did not consider removing charitable status.

It definitely considered the need to carefully draft legislation to reduce tax avoidance though.

It definitely considered the need to carefully draft legislation to reduce tax avoidance though.

Did it? I thought it briefly flagged up the issue but didn't actually get into looking at the technicalities of how it could be done and whether that would be feasible. TBF I am not sure that is their expertise anyway. Happy to be corrected as I did read it reasonable quickly.

Interestingly boarding accommodation, after school care + transport are in different categories to teaching SO in theory private schools could just charge VAT on core teaching hours but then boarding and "after school" (extra curriculum stuff) would be VAT exempt.

Not necessarily. Boarding costs are currently VAT exempt but they could be classified as a closely-related service and become VAT rated.

@SabrinaThwaite that will go down well with all the MPs who have kids in boarding school and ultimately have to vote this through.

Apologies, I had not read every bit of it and the media articles published when it was released certainly mentioned charitable status (including comments quoted from labour party itself).

So they believe they would get this draft legislation out by 2024/5 academic year when it has taken years to admit their claims about charitable status cannot be implemented.

Their proposal within the timeframe they have promised is undeliverable

Yes the author flagged up potential tax avoidance as an issue. As he is not a tax lawyer he didn’t get into the details.

@morechocolateneededtoday I think it is 25/26 they are looking at, unless I'm mistaken, but I don't think they will even be able to implement it in 25/26. Hopefully it will get tied up in draft and then parliament.

How can they apply for year 24/ 25 if the elections are held on Jan 25. They have not mandate?

MPs are answerable to their constituents.

And even better with the military and Crown Servants overseas who use boarding provision (paid for by the government)

Do they need primary legislation though? Depending on what they want to do they might be able to do it through changing VAT regulations.

Primary legislation isn't perfect but at least there is more scrutiny. If they make quick changes for political gain, without properly scrutinising it, it has the potetnial to be a real mess.

😡

@SabrinaThwaite and I would hazard a guess that most constituents have much more pressing issues than this to worry about!!

From a selfish perspective, even better if 25/6, I read 24/5 in a recent media article and was mentally consigning that it would be 1 year of paying 2 sets of fees in the worst case it did happen.

If 25/6 is earliest, my eldest will be in secondary by then so the burden would be affordable for just one child and short period of time.

Saying that, I still have serious doubts they would achieve it within 12 months of being in power

Another exemption required there. Wouldn’t like to be one of the lawyers drafting this legislation. Hope they are more competent than Keir.

I can’t see how it would be 24/25 if the election is at the end of next year as many parents will have already paid the fees for that school year or a substantial part of them. Like you, I’m hoping that it’s delayed as much as possible as our youngest starts year 7 in 24 and we are already counting down the years until we are school fee free!

Westminster charges £35,000 per year for day pupils. If families are happy to pay that for one or more children, I think we can safely assume they’ll be ok covering the VAT. No one is ‘scrimping and saving’ £35k a year!

No but there is a tipping point beyond which parents who are paying for it out of income feel it’s worth it. The inelastic demand has been due to wage rises and low interest rates. Now with high inflation and high interest rates, that may have an impact. Anecdotally a lot of parents in our school say the 20% will be that tipping point. Obviously labour disagree. We’ll have to see how it all plays out. If labour want to raise money, parents opting for state school instead will cost them
money. If it’s an idealogical thing that people should not use private schools. Then they may feel the additional cost to the state per additional pupil is worth it to achieve this aim.

and not all people pay full fees. I’d say the ones on bursaries who get a % discount will be the ones moving first. A % discount on a larger amount may be unaffordable and bursary pots are often limited in size.