If you have kids in private education, what is your school planning to do re VAT?

[Ladychaise]

I have two kids at a London independent school and currently just about scrape the cost of fees. Labour’s intention to add 20percent on the fees would make it impossible to keep them there, if all that cost goes to us - it is a worrying time.

The school’s bursar is being lovely but it’s very much a ‘let’s cross that bridge when we come to it’ take on it! I get that we don’t know for certain if Labour will get in or how fast they will implement this - but surely schools should be planning for this and working out how much of the VAT, if any, will be ‘covered’ by the school?

Aware there is a lot of uncertainty but does anyone else’s school have a plan in place? Thanks so much

How would you be resident abroad? Would your children board?
I don't think you'd be exempt unless you're buying a service or product to use in your home country.

Where I live in London many of the best schools are selective at Sixth Form and not just minimum overall grades/number of places going to the best achievers overall at GCSE, there are even set criteria within schools that you eg need a minimum of 8 to do Maths A level.

Regarding elite private schools there is so much misinformation around. For example, Eton College has an endowment fund into the hundreds of millions which enables them to support bursaries of 10 million per annum plus and growing if the fund grows. So that is potentially 200 boys for free there every year assuming 50k fees per annum- if they are free I assume no VAT but I don’t know how it will work if the fund is paying because I do not know the structure. There are plenty of state school boys applying to Eton now- I know families in our state primary consider it.

The future for private schools will have to be to build endowment funds like US unis or like Eton. These will be raised from alumni and it is tax efficient to give via inheritance tax. So there is another angle where HMRC may lose out. VAT is likely to increase alumni to give that way rather than to their eg unis.

Unis in U.K. also need charitable giving desperately now. It is all a mess and the Labour Party should make sure they know what they are doing by considering the whole food chain.

The most sought after school in Mumbai run by Ambani also follows the elite US uni structure of top elite of Indian society plus bursaries for very clever kids so that is the international landscape and model. Harvard/Yale etc all follow the model too- ok to let in the super rich and then get them to support poorer very talented kids. And they do leave cash in their wills. I assume the poorer kids if they make it big will also feel a moral debt to support the next generation in their former position.

I don’t object to the model but I think far left principles may due to a desire for state control. At the end of the day it is clear that no state outfit is ever going to match that elite level of education, experience etc.
Both Eton and Ambani also do very significant outreach into the state sector.

Do their pupils really obtain much better scores than pupils with the same GCSE grades at other schools? If you select the most academic students then to be the best school those students should be obtaining grades they wouldn’t have achieved elsewhere, not just better than schools with a broader intake.

I can’t see how you could structure your bursery scheme attached to an endowment so that the school does not have to pay VAT on their fees too. It would have to be a ‘no fees’ scheme rather than a bursery.

Like I said @SaffronSpice I am don’t know the exact structure for Eton but if a school funds the fees fully there is no VAT. If the endowment fund gifts the cash to the school and the school then pays directly then what. I am sure they will get the right tax advice in any event.

Teacher discounts are more interesting. Let’s say in some top schools teachers get 75% off fees (hypothetical). So on the 25% they pay they will also have to now pay VAT.
From a tax perspective it has always been interesting that a teacher discount is not counted as a benefit in kind in private schools but as some sort of extra cost to the school of having that child and most decided there is no extra cost. So the teachers just get the money off in the private sector.

On teachers with one of our 5 children we paid 15% of the fees from age 4 - 12 as his father taught in the school. I think 15% under the Pepper v Hart case is or was regarded as the marginal cost to the school of sticking an extra child in so HMRC see that as not a taxable perk because the teacher is paying that part. Other private schools give teacher parents only a tine 5% off the fees so it does vary hugely. The child does have to pass to get into the school as well.

I don't think VAT on school fees will mean a child who is not paying fees or whose parent is only charged 15% of the fees will then find the payer charged 20% of the full usual fees. However if a rich person or grand parent or neighbour chooses to pay school fees for others then I imagine VAT would be due. So how would we treat Beckwith v one grandparent paying 1 set of fees? The same or not? Will they differentiate base don if you share DNA with the recipient of your largesse? If local authorities pay millions for special needs children at private schools - they do - will they have the 20% extra cost? Probably yes.

@Xenia - what I said is that if a teacher gets a 60% discount and pays 40% off actual fees (increasing annually) then they will have to pay 40% plus VAT on 40% going forward which could be a substantial amount on a teacher salary. So some private schools will have to up teacher discounts for existing teachers to keep them whole overall and I wonder how they are going to fund that. I wonder how many teachers there are in various schools with significant discounts as I do not see that disclosed in the accounts except for senior management (where they disclose interests and their whole salary package).

In any event, my point is that I have a lot of friends who continually moan about private school fees increasing, teachers getting substantial discounts, large bursaries being handed out more and more and them feeling utterly squeezed in the middle so that group with bright kids is certainly very incentivised to leave the private sector and do “state plus”. And that group have very sharp elbows. Meanwhile in our grammar schools people are complaining as well about standards having gone down due to staffing issues but many are plugging the gaps with tutoring and tech apps. And as I said some of the newer tech apps are really incredibly good. So if the Labour Party actually want to make a difference to poorer children’s lives rather than harm the middle classes in a “gotcha move”, then they really need to be looking into the ways that technology can enhance education in a very significant manner and from an early age and teach parents how to use that to great effect. If a number of poorer immigrant parents in our grammars are doing just that then so can everyone else if they have the drive to do so. The issue is not just schools but poor parenting and low aspiration and that is what needs to be tackled in this country primarily, if you want equality. Some children are simply failed by their own parents and what is the state going to do about that.

The issue is not just schools but poor parenting and low aspiration and that is what needs to be tackled in this country primarily, if you want equality. Some children are simply failed by their own parents and what is the state going to do about that.

Immigrant families are often highly motivated to improve their children’s lives - afterall that is often what drove their relocation in the first place. But I think the situation for UK families is often more complex. From a parent’s perspective what does ‘failed’ mean? If they live in a culture of low income/joblessness, where street cred is considered more valuable than academic education, no way to progress locally, and petty crime is part of life, then they would not have the same idea of failure as others might. Low aspiration then is the issue. But it must also be considered how immobile some of these communities are - people just don’t travel outside their community, even only a few miles to a city centre. So these children have to be able to see aspiration within their communities (other than through drugs).

But it must also be considered how immobile some of these communities are - people just don’t travel outside their community, even only a few miles to a city centre. So these children have to be able to see aspiration within their communities (other than through drugs).
That describes some communities I've worked in.
Inter-generational baggage, inter-generational low aspirations, inter-generational low engagement with education, and at times inter-generational patterns of drug use, crime, minimal employment, poor relationship choices all contribute to how the current generation of students present in school.

The schools are often trying their best, but it's very difficult when the dominant cultures around the children are likely to hinder educational engagement.

The amount of time, energy and resources that schools spend trying to mitigate these issues is huge. The problem is that all this is taking time, energy and resources away from educating. They're not really issues for schools to address. More specialist services are needed.

@SaffronSpice i agree, I think it’s easy to imagine other people’s experiences and capabilities are similar to your own, but the difficulties are really complex, I work with a lot of parents who have had an extremely negative school experience and have a poor relationship with ‘authority’ more generally. It’s not that they have poor aspirations it’s that they don’t see/have experience of school education as beneficial and they are trying to protect themselves and their kids by devaluing and pushing back against school. They see no way of succeeding in education, it’s simply something to get through unscathed.

I see others completely failed, the needs of their children aren’t being met by education, they can’t access decent housing, they can’t access healthcare and are trying to navigate complex systems, designed to be difficult in the name of ‘efficiency’ and are just constantly fobbed off because most of the gatekeepers to these services don’t value them.

Schools have to interact with these families, they will try with varying success to exclude them, because they’re a massive drain, both in terms of time and money. I’m currently trying to get places for several children on roll on at my school but not able to access it for various reasons and none of the parents has low aspirations for their children, they are all in very difficult situations. The county who should be able to provide a suitable place seem unable to. They are much more invested in ‘sharp elbowed’ middle class parents, partly because they are easier to support, partly because they know they are more able to go up the chain of command, are better connected and informed and therefore a better use of resources.

If higher taxes in whatever form can better support these families with complex needs then it will benefit whole schools and communities. I fear that government is looking for easy answers to complex problems.

I can’t however imagine that increasing the cost of private education will have a significant negative impact on state education, which is where over 90% of people are educated.

“I can’t however imagine that increasing the cost of private education will have a significant negative impact on state education, which is where over 90% of people are educated.”

It would have impacted us massively ten years ago as my DC would probably not have gotten into grammar school without tutoring if there had been VAT on private school fees and even more competition. And at the time the local comp options were not good, having since improved a bit but gone backwards again since Covid/staffing issues. Covid has had a major impact on the mental health of adults and compounded with the cost of living crisis putting further stress on families, it really is no surprise that many children are being failed in their own family unit.

It will also affect relocations into London/other big cities through higher tax paying individuals because the private sector was picking up the slack for having some places for relocations whereas the local councils will not give guaranteed school places. In many countries if you move there you are guaranteed both some functioning health care system and education for your children. The U.K. can no longer offer either reliably so there will be long term impact to state finances if those issues are not addressed. The way the country is currently structured is that the top 10 per cent earn and pay most the taxes. I am not saying this is right.
There is an easy solution if councils are legally obligated to find school places close by in a more efficient manner than is currently the case. The current situation is virtually impossible in many areas. No good school places, no dentists, no functioning NHS. Attacking the private sector that picks up the slack will lead to inefficiencies and will impact public finances at large.

I've heard some schools are taking payment for years in advance to swerve the vat.

“I've heard some schools are taking payment for years in advance to swerve the vat.”

I hope those schools, management and bursars in particular have had sound legal advice and have asked the parents to sign off in writing that they have sought in depth financial advice. If they go bust, could they be done for misselling otherwise? Also, the new T&Cs in the standard form parent contract have been updated to state that the schools can come after parents for VAT if it still ends up being payable. Schools really need to be careful as to how they deal with this.

DS’ school is pausing all cap ex work with the aim to offset that against VAT. They’ve also talked about reducing the school day, removing scholarships of over 50%, and giving all students from their primary school a guaranteed space in their secondary school (and having a single ‘fee for life’).

They are much more invested in ‘sharp elbowed’ middle class parents, partly because they are easier to support, partly because they know they are more able to go up the chain of command, are better connected and informed and therefore a better use of resources.

When people (politicians) describe middle class parents as ‘sharp elbowed’ to imply they are unfairly benefitting, what is actually happening is those parents are capable/literate/have the financial means enough to navigate the labyrinth placed in front of those trying to access their rights. They are not to blame that they can do this and others can’t. It is those who placed those barriers/systems/maze in front of parents who are to blame.

I also support some parents too and have on many occasions to told them it is fine to write emails in natural language/how they talk (minus swears) and not to worry about their spelling so long as the word can be made out. Not being able to spell or use formal language is enough to stop them feeling able to advocate for their child at school.

These parents are also the type who will only let their children socialise with other parents like them. So don’t expect any kind of trickle down effect. Rich and educated socialise with rich and educated and they all attend the same afterschool classes etc.

Ah, I was thinking of a different group often accused of having sharp elbows - those with SEN.

I can’t however imagine that increasing the cost of private education will have a significant negative impact on state education, which is where over 90% of people are educated.

As is becoming increasingly clear, parents and schools, including some featured on these pages, are planning around the tax in volumes. The assumption everyone just "pays up and shuts up" is not looking good.

As you observe the state system is in some ways influenced by "sharp elbow parents". Do you think it will be better, or worse, for the causes and children you support if there are more "sharp elbow parents" trying to get the best of the limited money available?

"When people (politicians) describe middle class parents as ‘sharp elbowed’ to imply they are unfairly benefitting, what is actually happening is those parents are capable/literate/have the financial means enough to navigate the labyrinth placed in front of those trying to access their rights. They are not to blame that they can do this and others can’t. It is those who placed those barriers/systems/maze in front of parents who are to blame."

Exactly - remember in the pandemic when the Tories were trying to say we should keep them in school? It was the "sharp elbowed" parents who whipped their kids out forcing the govt to actually come up with a plan.

Paying in advance has always been around for school fees. I remember when our first child started in a private school in the 1980s reading about some schools' schemes - it was just for the very rich and I would imagine there were provisions about refunds and the money being in a trust account to protect it etc. I still would not pay in advance however today (or then) as you never know what will happen.

True. But most profoundly disabled students as well as ones with minor SEN are educated privately. This is why I have my suspicions about the legality of Labour’s policy - how on earth can you distinguish between those sets of students at a regulatory level?

I also think they would have issues with the Grammar schools shortly after. Not just because all of the private kids would move to these areas turfing out any remaining kids from lower SE backgrounds (as if there are any nowadays) but also because private and Indie schools offer free places through bursary and scholarships to their kids, when Grammars don't and are also selective. As was pointed out on another thread there are far less disadvantaged or SEN kids in Grammar schools as a result. I can't see how spending on education is a bigger sin than buying 10 cars and flying around the world every year while your kid gets education free at a selective grammar that no poorer kid can get into because you paid for tutoring. They might have to reform those too and there would certainly be sharp elbows then.