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

@Ladychaise - that’s probably part of the reason why, this has been in the pipeline for a while.

Does anyone know if this would impact Wales too?
Our daughter goes to a small, special school that we pay for. It would cripple us

I really hope there is a carve out in the legislation for special schools,, particularly give local councils often pay or at least contribute to fees there.

One of our local private schools has already sent a letter to all parents saying they will have no choice but to pass the full 20 per cent through and what is more, they think Labour will win and they have been advised that this will be implemented. A friend showed me the actual letter she received. So it read like a warning to parents to brace themselves! I think they want people to plan ahead and go state if they can’t afford it. I think they just want properly rich people to join now so they can protect their own finances and their own teachers. The school is oversubscribed. I do get the impression that many people working in independent schools see their own parent group as cash cows as well, not just the likely incoming government. So I don’t think private schools will do enough to challenge.

We are in an 11 plus area so next year’s 11 plus exams are going to be utterly crazy and catchments will shrink because people move here for state schools as is.

I don’t think they would do it - it’s a popular ‘vote winner’ for them.

Kids will have to leave private schools and go to state. Even more families will move to catchment areas for the ‘outstanding’ schools, pushing up house prices and pricing existing families out of the areas. So who are they really hurting here?

Do foreign based families pay VAT on school fees anyway?

I teach in a small, non-selective private school with a tight financial margin each year, and we most certainly don't see parents as cash cows. We are very aware that many of our parents are just about affording fees now and would not be able to stomach a significant increase. I'm a teacher, not a bursar, so I don't know the exact details of what is being considered, but I do know that my colleagues have been planning for this for a while and are keen to avoid passing the full cost on to parents if at all possible. They are looking at ways they may be able to do this, but it does sound as if bursaries and scholarships might be difficult to justify.
It's a tricky one. I think it's the wrong policy for Labour to go with (and I say that as a lifelong Labour voter) because the Etons and Winchesters of the independent sector won't really be affected - their parents can and will stomach the increase and they have vast reserves anyway. Smaller schools, who offer something different for children who would not cope in the increasingly cash-starved state sector (like those who do not qualify for extra support, but due to some SEN find a huge, busy school with large classes impossible to deal with), are the ones that will have to turn away less affluent parents and risk closure. That said, I draw the line at voting Tory! On education alone they have done so much damage, let alone bankrupting the NHS, taking us out of Europe, partying through Covid and recently espousing far right views that any decent Tory ought to be ashamed of.

I read somewhere that they will not charge VAT if a child has a EHCP (there are obviously a lot of children with specialist needs who don’t have a EHCP for whatever reason though).

@Biscuitsneeded - I agree with every word you’ve written. The real bastions of privilege will survive but many schools will struggle. It’s Starmer trying to pacify the left wing of the party. The poster who says that parents are seen as cash cows is wide of the mark. There is a lot of lobbying behind the scenes from HMC and other groups to find a way round it. For example it has been suggested that Independent schools could train teachers at their own cost to be then released into the state sector . I don’t think any of this will work because this is ultimately an ideological issue not an economic one.

A teacher friend at a London Indie has said her school have already put prices up. Between 15% and 18% on! She couldn’t believe it

We haven’t yet. Assume we will immediately if Labour gets in and they bring this policy in. We already have quite a few families really struggling at the mo so not sure what will happen.

Thing is, my school is bursting at the seams with waiting lists for every year group. If some families drop out I imagine they will be replaced pretty quickly.

Does anyone know the answer to this question: if an indie school is a limited business and pays VAT already, will a further 20% be added?

I feel like I should know this answer but I don’t.

funnily enough, keir starmer himself was educated in a private school! and I do agree that many parent cut back on other things to afford a privated education for their kids!

The plan is to make education a vatable service so its not that private schools will pay vat when they buy things that attract VAT as they already do this anyway. its that the customer (you) will pay vat on what they are buying. The school will just be collecting your vat for the government.

State schools reclaim the vat they pay from the government..

Education is currently exempt from VAT so a school won’t be adding VAT onto school fees at the moment. They will need to if Labour’s plans are introduced.

“our school is encouraging parents to pay fees in advance but only verbally: nothing in writing as it wouldn’t be good PR.”

Are the fees ringfenced? What happens if the school goes bust? Do they have a clawback in the prepayment contract to charge VAT after all if they have to?
Sounds financially dodgy to me- could the bursar/head face misselling allegations in the future? Why would anyone put a large lump in now interest free if the opportunity cost is 4-6per cent compounded in the bank?

As far as I know, different schools have different arrangements for pre-paying fees. They often give you a discount for paying up front. Some will say that the prepayment only covers a certain amount of fee increases, so if the standard increase goes above a certain amount one year, parents will have to make an additional payment.

In recent years, with low interest rates, the rate of discount offered by many schools was negligible, so it often wasn't worth doing. However, with increased interest rates and the threat of VAT, it becomes more attractive.

However, there will be many families who won’t just have several hundred thousand pounds lying around. It’ll be the wealthier families who can afford to pay. Those who will struggle with the VAT are less likely to be able to afford to pre pay.

It’s all very well advising parents to pre pay fees, but many won’t be able to afford to do that (although I have seen a suggestion that people might re-mortgage their houses to be able to do so). Those who can afford to pre-pay fees are less likely to be affected by the VAT. It’ll be those families who already stretch themselves who won’t be able to stretch to another 20% and who won’t be able to afford to Lee-pay.

With fees of, say, £20,000 a year (many are far higher than that), that’s £280,000 for a family with 2 children just for secondary school. Whilst it would potentially save over £50k in tax, there are a lot of families who simply don’t have that money sitting around.

I support Labour (and this policy) broadly but I think it will cause more problems in certain areas.

instead of paying for private school better off families will instead choose to buy the houses closest to the best state schools, thus pushing our a poorer families.

my ds is in year 6 and most likely is going to the local state however I’m concerned that due to the likelihood of a Labour government less families will apply for year 7 at the local stage have thus making it harder for my ds to get in.

There are lots of current year 6 parents now going down the 11+ state grammar route rather than the private school they were planning. Those children have often been to private primaries/prep schools who will be preparing them for the exams and, therefore, have a higher chance of performing well. Their parents can also afford to rent houses to get within catchment of a grammar. The children who suffer will be those who would otherwise have got a place but for the huge influx of children who would have gone private. This is why the policy is a ridiculous one. Parents who would otherwise have gone private will now use the state system, manage to get into the best state schools, taking away those places from another child.

yes, we’re agreeing aren’t we

Agree with this:
It's a tricky one. I think it's the wrong policy for Labour to go with (and I say that as a lifelong Labour voter) because the Etons and Winchesters of the independent sector won't really be affected - their parents can and will stomach the increase and they have vast reserves anyway. Smaller schools, who offer something different for children who would not cope in the increasingly cash-starved state sector (like those who do not qualify for extra support, but due to some SEN find a huge, busy school with large classes impossible to deal with), are the ones that will have to turn away less affluent parents and risk closure. That said, I draw the line at voting Tory! On education alone they have done so much damage, let alone bankrupting the NHS, taking us out of Europe, partying through Covid and recently espousing far right views that any decent Tory ought to be ashamed of

I don't think it's the right policy and it's not going to hurt the people with vast wealth, power and connections.
It's going to affect the middle to low high earners, professional families who are concerned about the mess the state sector is in and remove several rungs of the ladder.

I feel like Labour is dangerously close to targeting the low hanging fruit and getting into the politics of envy here. It feels like the message is "trust us because you see that family down the road where Mum is a civil servant and Dad is an engineer? Yeah the reason your child's education is crap and there's no services is because they spend a grand a month on private fees at their local small independent".

I just don’t understand this policy at all - it is going to push all the families who can only just afford private school (a surprisingly large amount) into the state sector, which is already massively stretched, underfunded and understaffed. Some private schools will close resulting in even more pressure on the state sector. This in turn will mean people will move closer to “good” state schools, pushing house prices up and meaning poorer people going to the less good schools. The very rich will still be able to afford private school so the elite will be even more elite. Plus private school teachers will leave the sector rather than move into state schools (I know a lot of teachers who have said this).

I agree in an ideal world we wouldn’t have private schools but I really don’t see this as a solution.

Originally, Labour voted to ban private schools altogether at one of their conferences, and redistribute their assets. Then they scrapped that idea and said they’d remove charitable status.

It’s odd they didn’t look into the logistics of banning private schools and seizing their assets and removing charitable status before they made these promises.

Yes we are! It’s people like your son who will now have more competition for the state places. I think a lot of people believe that the only children and families who will be affected are those currently in the private sector. It won’t be.

Totally ridiculous! Posters on Mumsnet have been saying for ages that removing charitable status wouldn’t affect the VAT position, but yet it appears that the Labour Party have only just realised this. I’m still not convinced that adding VAT to fees is as straightforward as they think it is. It will have unintended consequences.

I’m still not convinced that adding VAT to fees is as straightforward as they think it is. It will have unintended consequences.

Yes, and I’m sure private schools will put up a fight.