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.

No, if they are delivering education services that is zero rated for VAT whether you are a charity or a profit making business. Same goes for educational science club or computer coding club activities run eves/weekends/school holidays (which also poorer children cannot afford so they are an unfair advantage to wealthier families too)

Education is exempt not zero rated. If it was zero rated it would still count as a taxable supply for Vat threshold purposes . Exempt means it is entirely outside the system

@cyclamenqueen thank you I hadn't appreciated the difference. I guess it's only relevant to companies who supply a mix of services where some are educational and some are not?

It's relevant, because if something is an exempt supply you can't reclaim VAT on your purchases.

Whereas if you are making zero rated supplies than you can reclaim your input VAT.

Hence, private schools cannot currently reclaim any VAT from HMRC, as they are making exempt supplies.

(Note that state schools have a special arrangement with HMRC whereby they can reclaim their input VAT).

Totally agree

Hi, I have received school email today concerning this VAT.

I wonder any action planned to against this plan?

What did it say?

absolutely crazy to charge VAT on top of fee! we are not getting any benefit of education from the state schools. Usually that is £6000 per student per year!
On the contrary, we should pay the school fee before tax deduction!
we should not pay for tax for education!

parents, we should setup a plan to against this proposal!

No benefit you say? To having an educated workforce? Do you really mean this?

I thought this is obvious. We are not accessing the state school education, so we do not "benefit" from the system. Instead we pay independent school.

Is it not obvious that you benefit from a broadly educated population? How very myopic of you if you can't see this.

@explainthistomeplease i think I would turn your argument back to you and ask why education should ever be taxed, since it provides a benefit to society more broadly? Surely there should be incentives rather than penalties for investing in education?

@JuneSun I think you should check with the PTA and engage with the school with regards to what savings can be done. A lot of schools are doing a significant amount of outreach activities in the local community (free Saturday classes for gifted state pupils, free lending of facilities to disadvantaged state schools, etc). There is also usually a significant amount of bursaries.

I believe that is in place as many schools want to give back to society. As the giving back now will come in the form of VAT, bursaries should be redirected to existing pupils (who struggle with fees or as a general deduction), they could either skip Saturday classes or charge for them and the facilities could be rented out to sports organisations. Depending on the school, that could enable it to make up a significant amount of the extra cost.

I think private schools need to be run more like a cost savvy business given the VAT ☹️

@GrandmasMeatloaf, the school emailed us about what they plan to do to raise/save money. However, I wonder what parents can do to make our concerns heard by the government. with 20% raise, a significant number of families can no longer fund studies in independent schools and return back to state school. That will increase government's spend for state schools (roughly £6k per student per year), rather than saving.
Independent schools may have to reduce staff to balance their finance sheet. Our school is the only sizable business in a small town, and many local businesses/residents work for the school. If the school business collapses, this will be disastrous for many families. Is this really what the government want to see? I hope they really thought these through.

@explainthistomeplease perhaps you don't have children in independent school, and you don't feel the pressure. For families with children at independent schools, a 20% increase, means £3000-£10k of increase in fee, and roughly £6000-£20k cost in terms of salary before tax. with more children, you need to multiple this number. I think this is reasonable for parents to raise their concerns.

No I didn't. They went to their local (very average or worse) comp and did brilliantly. They had a stable and educated family background and a thirst to learn and achieve.
Moreover we could have taken the independent route because we are well off. And even shouldered the VAT. But we chose not to. We're not alone in this.
Honestly - if it's that much of a worry, ask yourself whether your family have the factors we did - motivated and educated, with children who want to do the same. If so maybe you can spare yourself the worry.

There is a petition on change.org - not sure I am allowed to post links here but you can search for it. You should get together with some parents and talk to your local MP, especially with regards to the impact on the local life.

we are still considering options. I am fully supportive of all private schools can do to save money, even if that means no outreach activities.

personally I believe that the enrichment for state pupils in the form of free lessons, numerous bursaries and joint projects are better for the local community than the VAT but Labour believes that the money can be used better centrally- maybe as long as it doesn’t disappear into the NHS. There will also be a significant demand on infrastructure given the migration. Does anyone know if the money will be completely ringfenced?

We are personally considering switching to state school (may need to move but would take that if necessary), supported by extra tuition outside school in key topics. There are some quite brilliant tutors out there. We will also use the saved money for extra curricular activities (sports /music) and some lovely holidays.

I don't think parents wealthy enough to afford school fees should be campaigning against this change, no.

I do think that the VAT should be structured so that the first £7,000pa of fees is VAT free and any amount in excess of that should be taxed, on the grounds that education is a human right and is essential and should not be taxed, but given that the state is able to deliver an education at c£7k per head any fees in excess of that are paying for "extras" like smaller class sizes and brilliant sports facilities which are legitimate things to spend money on but should be taxed.

School fees are part of a normal market economy of supply and demand. If a school is able to fill all its places from the demand from the local population with fees at £18,000 and is massively oversubscribed with fees at £15,000 because more families can afford it then obviously they put the fees up to £18,000 and have more money to spend on these extras to make those families that can afford £18,000 feel they are getting their money's worth.

When VAT is added, the school can rebalance the budget to take £15,000 per pupil which with VAT added still makes £18,000 so the same number of families can afford it. With £15,000 per pupil the school still has twice the budget of a state school. Yes class sizes may increase a little. They may decide to abandon the obscure GCSE subjects that only 3 pupils want to take and say that a subject is only viable if there are at least 15 pupils wanting to choose it, they may have to spend less on grounds upkeep, sporting facilities and other extracurricular stuff but they will still be viable. There won't be a massive influx of pupils to the state sector. The majority of families will stick with their existing schools and find ways to cope, they will grumble but the number of families affected is too small to make any real political difference.

“I don't think parents wealthy enough to afford school fees should be campaigning against this change, no.”

I totally disagree. I think this VAT proposal is ludicrous and no other country taxes education at 20 per cent. It is a race to the bottom - they can’t get enough teachers to teach in the state sector. I reckon the hidden agenda is about private schools having to let go of staff. It will also have repercussions for unis and hardly anyone is going to study the humanities and Classics etc anymore. I think it is a real shame. I also think that the private sector is going to really struggle - whilst they went overboard on facilities for many years right now with cost of living I reckon many will be stuffed.
What I do agree with is that the private sector should be better regulated and they should be paying for that regulation themselves. Judging by the boards on here and what some friends say, some do take the mick and advantage of parents, kids and teachers too.

@Araminta1003 "It will also have repercussions for unis and hardly anyone is going to study the humanities and Classics etc anymore." Sorry,what?

Also slightly staggered about @Araminta1003 's assertion.
DS like myself is comprehensively educated. He is a writer and I am a (low level though I've had my moments) journalist. Ditto our current Poet Laureate and a every long list of other luminaries in the arts.

Can you dig down into that assertion please @Araminta1003 ?

How many state schools teach Greek and Latin? Come on then. We had to pay for it as a club even at Grammar. Studying English - again the domain of the privileged middle classes. Because you cannot guarantee getting a job.

As a country we are pouring more and more into the NHS and not enough into Education for our own. This VAT policy is the biggest pile of crockshit distraction in a long time! As bad as the Tories. Disingenuous policy of hate and will cost some private school staff their jobs.

@explainthistomeplease- so your DH is a famous writer and made a ton of money and enough to pay for private school? However, you chose state. This would be a rather unusual situation and most aspiring writers do not make it, financially speaking.

Or are you old money/inheritees - because if you just inherited money and chose an arty life you shouldn’t be preaching your values to others. Especially not to those people paying out of already highly taxed income.

You misread. My DS is a writer so works in the arts and somehow managed to achieve this from a lowly comp. But I wouldn't describe him as famous. Very much on the learner slopes. Tho he would love it that you mistook him.

Also laughing at old money @Araminta1003
Me and DH both came up through state education. He got a PhD and is just very good at what he does. And I got lucky I think. Made it through the right interview and into the BBC.
Solid MC first gen university is what we were. With no Latin. Although being a driven girl his sister put herself through Latin O level prior to medical school. So she's quite a rare bird.
I'm chuckling though that you could
mistake me otherwise!