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.

Yes it does. And, having double-checked, I see that animal charities do enjoy VAT relief in many circumstances.

Good old Labour: donkeys are more worthy than certain children!

It might be better to think of private schools as “not for profits” rather than charities. If they are no longer charitable trusts, who owns the historic buildings? The head masters? The liveries? The crown? Etc.

As for VAT, it’s a slippery slope to no longer say that education is VAT exempt. Sure, we can argue that private schools are a “luxury”, but you could equally say that ballet, tennis and flute lessons are a luxury. Do we really prefer to push spending towards consumer goods rather than education?

Inequality is a serious problem in the UK. This won’t do much to help it. (Well, a few frustrated people may get a frizon of glee over spiting those who can afford what they cannot.) What would help is growth and improved productivity. There needs to be more opportunities. Our economy has been stagnating for a while. Even the city looks a little rope-y. We need to invest in better infrastructure, especially in the North. Fund more university research. Review how we compensate communities living near new major works. Train more home grown doctors. Etc.

Faffing around over private schools is a self defeating, spiteful waste of time. There are better places to put our effort.

No, VAT exemption for schools really has nothing to do with charitable status in this case (so you can leave the sad donkeys out of it).

Private schools have been exempt from VAT as education is exempt under EU rules.

But now the UK is no longer in the EU and can diverge from those rules.

Handy explainer for you.

https://www.mha.co.uk/insights/vat-private-schools-fees-a-labour-government

Brexit really is the gift that keeps on giving.

You’re wrong. See here: https://www.gov.uk/vat-charities and here https://www.farrer.co.uk/news-and-insights/vat-on-school-fees-qa/

(The first link is government, the second is a major law firm.)

There are various sources of VAT relief. Charities attract the relief generally, subject to certain conditions. This has nothing to do with freedom from European rules. That is, I’m afraid, nonsense.

If the only reason for VAT relief were residual Euro rules, animal charities would not have VAT exemption. But they do. Because they’re charities.

<Sigh>

Your links are nothing to do with why VAT could now be levied on private school fees.

It is nothing to do with charitable status.

Under EU law, education is exempt from VAT.

Here’s the relevant piece of EU legislation:

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02006L0112-20220701

After Brexit the UK no longer needs to follow EU law, hence the exemption can be removed from UK law.

Animal charities are not providing education services, so this particular exemption does not apply to sad donkeys.

All over the press now that the richest schools with well off parents will take prepayment of fees and invest those at tax free interest because they are charities. So the well off parents of Etonian’s can pay eg 5x45000 up front and the school just needs to open a segregated account and get a 5-6 per cent interest deal in this climate, job done.
Some may even make a nice little earner out of this if they tie the money up nicely in a high interest environment. I don’t think they pass the interest back to parents but I am sure some bursars and tax advisers will come up with things.
Prepayment of fees is a long established practice.

Hands up, I'm a private school parent so I obviously have skin in the game, but I don't necessarily buy the whole 'private school is a luxury' thing. Sure, we can all conjure up visions of Etonians dining on swan- but in reality, for most people private school is just school - but school with manageable class sizes, big playing fields, plenty of sport and creative subjects, and decent behaviour. Is that a luxury? If so, how sad. It's certainly a privilege at the moment, as it's only available to the wealthy and to those who are able to get a bursary - but shouldn't that kind of education be seen as the aspiration for all children, rather than a luxury? Perhaps KS should be thinking about what's possible in achools if you fund and manage them properly, rather than trying to tax and worsen private schools out of thinly disguised spite. I'm with the EU on this one. Keep the principle that education should be tax free (but tax wealth more to pay fir better state education).

Thank you. Thats really interesting.

@jjkkll - yes I agree, the concept of taxing Education is highly offensive and atypical. I also think it is very short sighted and disingenuous. The real issue for the many is the big differences between individual schools and areas in the state sector, despite the comp wet dream, it just is not born out in practice. Rich Sevenoaks town recently managed to get 2 new shiny grammar schools opened. A middle class area in nearby Bromley, Bickley managed to get a whole new shiny boys school built on a lovely field. Why? Because the sharp elbowed middle class parents were behind them all the way, dealt with the nimbys, chatted to their mates in politics etc.
That does not mean that down the road in Downham schools have improved, far from it, more and more knife crime. The whole thing is an utter lie.

Social segregation is a massive, massive issue in state schools and that is what needs to be addressed. The poorest most deprived areas need a ton of funding thrown at them and links with top performing state and private schools and help and mentoring schemes etc. That is the kind of stuff that works, not coming up with some silly policy that is going to hurt and stress out some parents of kids and mess up even more kids’ education.

🙄

If you’d bothered to read the links you would have seen, for example:

Under VAT law in the UK, the provision of education by an “eligible body” (which includes a registered independent school) is an “exempt” supply for VAT purposes. Goods and services that are closely related to education are also exempt from VAT eg catering, transport, school trips and boarding accommodation.
In addition, there is a separate VAT exemption for a charity or not-for-profit entity which supplies education or vocational training if it…

So education services are VAT exempt in themselves. But if that exemption were abolished education services would still be exempt if provided by a charity. Any Labour legislation will have to take away VAT by reference to both situations. Half of independent schools are charities so half of the schools being targeted will need the charity VAT change enacted otherwise they’d lose VAT exemption as a school per se but keep it as being a charity.

So it is true that Labour believes the care of Romanian street dogs to be more worthy of tax relief than the education of some children.

“So it is true that Labour believes the care of Romanian street dogs to be more worthy of tax relief than the education of some children.”

That is because both main parties are desperate for the grey vote and anything tangibly to do with pets and old people and inheritances left will not be touched. But nobody really cares enough about children because they do not have a vote!

He did not say it was too complicated just that it would take years

Trailinglobelia that is interesting. Did he say how many years? I wonder why that put him off.

And the other side of it nothing gets people going more than the thought of taking away from other children

All good, if votes are in it

If private schools are so wonderful that we have to get rid of them out of fairness. Maybe we should consider why they are so much better. Is it all money? Or is there something in parental choice? In grouping children of similar abilities together. Of making sure children get enough exercise, etc.

We have a free market in energy suppliers (which is just ridiculous.) Why not school vouchers?

We’ve lost most of the grammars, now we will lose most of the private schools. It’s very ideological and not very effective in practice. Schools will be more centralised and standardised than ever. The state will have an ever firmer grip on our children.

@alwaysraining123 If half the children in your class leave, what makes you think your private school will not double the remaining kids’ fees to make up for the lost fees?

Lockless: "The typical arguement is you have EARNED your money, you 'deserve it' and should be free to spend it as you wish. Well, it's possible to some extent". What is also true is that as tax rates get higher and tax measures like this come in, people may also chose to ease off and NOT earn it. And don't tell me people won't do that because I know several who are planning just this. Then where will the state be?

Starmer is a classic socialist. He is creating more state dependency, removing freedom and choice in the name of ideology.

Agree @Teentaxidriver

Having a mortgage, being committed to pay school fees, etc. are strong ties that keep people on “the hamster wheel” slogging away.

It’s going in the wrong direction. More people on the housing ladder, more people able to access private schools us the way to go. People need a stake in society beyond wondering what they are owed and debating how everyone else should live.

The utter contempt most people in this thread have for people that are better off after decades of hard work (and granted a good bit of luck) is mind boggling. People got offended when I said ‘state school kids are going to get crushed if people preparing for 13+ instead start going for grammar schools’ because it reeks of contempt. What about the contempt in all the tiny violins I have lost count of in this thread?!?!

I broadly categorize the private school parent population in two groups. Those with old money and go to Eton just because their fathers and grandfathers went there. There are others who come from nothing and are doing the best they can to provide for their family.

I come from a third world country and my dad could never afford a car his entire life, because even though we went to state schools, he supplemented our education with tutoring for his 4 kids. The values he taught me include doing the best for your kids’ education, not just ‘what the state provides is good enough’. And so yes, we will probably suck it up and pay the VAT. Aspiration and hard work (and yes good luck) is what got me out of a third world country and brought me to the UK. To come here and see the contempt for success people have here beggars belief.

I can also see that a lot of people here believe that private schooling, private healthcare etc. are luxuries. From my perspective, we only go for these ‘luxuries’ because of the STATE’S FAILURE to do its job. If the school provided adequate schooling, we would be happy to go to a state school. A lot of people from my community actually do think that the state schools here are better than the elite schools back home so why pay unnecessarily.

And I can understand if people feel those on £100k+ or £200k+ are not ‘scrimping and saving’. But if you do the math, deduct the taxes and NI, deduct the ~£6k tuition for two kids, deduct what food/utilities/public utilities cost an average family, what’s left is hardly a life of opulence.

For me, it’s the inability to understand that if I didn’t need to work those hours to pay the fees I wouldn’t. I’d go part time. Less tax paid more time with family. For people genuinely paying fees from income, this is a very real decision. So far our decision has come out in favour of working full time. I thought my kids benefitted more from the school than me being at home more.

When we go to the state school, that decision will change. My family will benefit, our finances will still be better then before as no school fees (so I will still be saving the spare for their house deposit) and the state will suffer as I will pay less tax (quite a lot as this decision will take me out of the whole losing personal allowance etc) and also take up my children’s funding for state education. What a result for the state!

As for VAT, it’s a slippery slope to no longer say that education is VAT exempt

VAT on university fees anyone? How do they differ from private schools other than student age?

The utter contempt most people in this thread have for people that are better off after decades of hard work (and granted a good bit of luck) is mind boggling.

A sub-set of the better off, and some not so well off, who live near good state schools will do v nicely…as people scramble to get into catchment areas.

That’s the middle class Labour way: deny advantages for school fee payers but keep them for yourself if you can afford a house in the right area, catchment premium and all. That way they can denigrate independent education and say they went state - out of principle, natch - but get the benefits of backdoor selection by money.

I frequently scoff at neighbours who say that the local school was no part of their decision to move here. Pure chance that they moved in time for the kids to get in!

The is what happened with NHS consultants and GPs. A cap was put on pensions so consultants with large pots nearing retirement saw no incentive in continuing to work due large tax bills.

Under current VAT regulations (inherited from EU) they don't differ (neither do pre-school/nursery fees)

That doesn't, of course mean, that you have to change for all age groups just because they are currently together.

Personally, I find it illogical to put VAT on the providers of education for those of compulsory school age, whist leaving those outside it exempt. But that doesn't mean it can't be done

Differences in schools don’t just exist between middle class areas and deprived areas. See Brampton Manor Academy in Newham. https://www.standard.co.uk/news/uk/oxford-cambridge-oxbridge-london-eton-b949961.html

Why do some state children get the advantage of somewhere like this but others not?

That article is fascinating. The children - at least the six formers - come from miles and miles away!

Another link suggests some parents are willing to have their children travel for two hours each way to attend that school each day. Amazing.

It is refreshing to see that the state sector can produce centres of excellence. Just a shame they’re so very, very rare.

(As I said upthread, my kids all went to state schools. We couldn’t afford private. But I don’t despise those who can afford it.)