Vat Question????????

[Anoth]

Can I ask a silly question??
We have been given our school fees for 24/25 academic year now for the school my daughter attends.
My question is if labours policy comes in half way through an academic year will the schools be allowed to put the fees up for the remainder of that academic year? Eg if we start paying X amount on September and then labour get in and introduce the added vat in October. Will the fees go up in Jan of that academic year? Normally fees remain un changed for the whole of the academic year once fees have been published but I understand this is a strange situation!
Just wanted to know if I need to prepare to save more for 24/25 fees just in case or will these that are now published still remain until the end of July 25??.
Thanks!

I don't know the exact answer and I'm in the same position (and their fees are already up for September so I'm not keen on an additional charge!).

Having read the school fees VAT threads on Mumsnet labour need to put through the legislation for this so I would think this would come into effect for the 2025/26 school year. Also schools have to do budgets etc so I don't think labour could implement it as soon as Jan as that would really mess things up for them.

I would imagine that if it became policy then they would have it start from September 2025 at the earliest because schools and parents need notice.

Labour want to start is asap and they may even back date to start of academic year 24/25.

If Labour implement the policy which results in VAT becoming payable on school fees, the statutory instrument would be required to be passed in Parliament to effect the change. Then the next time the school is raising invoices VAT will be applied (on the basis that the schools will register immediately knowing that they will breach the VAT threshold)

No it wouldn't need to go through parliament if they simply want to add VAT to all private schools. All they need to do is change the remit for what falls under VAT. If however they want to exempt certain parts or re-clasify education then yes that requires legislation. They will go for the quickest, bluntest way of doing it and worry about the consequences later eg legal challenges etc.

If "Education" becomes VATable, presumably that means it'll be applied to Nursery Fees, University Fees, Music/dance/football lessons, tutoring etc? That would be catastrophically expensive for many parents, and not just the super wealthy private school parents! Or am I misunderstanding?

You are competely correct that it could apply to all, or some, of those.
You are incorrect that all private parents are super wealthy.
Opening the door to the taxation of education could (in theory) lead to the taxation of all of these. It is all theory and supposition at this point. But once the door is open what government desperate for some extra cash would not investigate other avenues of tax revenue through education and widen the scope of what would be included in the definition.
There is a reason VAT on education is illegal in the EU.

The simple answer OP, is that no one knows. And I include government in that.

In theory it could. Because at present all depend on the same EU principle of no taxation on education. We can now change that..

In practice it won't, because they will restrict it to schools, and they will need to include definitions (so schools can't evade by hiving off activities currently covered by fees)

I would expect it to come in at the start of the term following the new Statutory Instrument, so yes it could be part way through a schoool year

I guess it would be down to the individual school too, because as I understand it's up to them how much of the increase actually gets passed onto parents to pay?

They will have a whopping majority- they can get this through quickly and easily ivv by am afraid, and they won't care about school budgets because they hate the schools. I'm expecting Feb half term at the latest.

This is a punishment policy, that won't matter!

Unfortunately, no one really knows the answer. The Labour Party have said that they will do it pretty much straight away, which in theory could be part way through a school year. My gut feeling is that they’ll implement it from the start of an academic year, with prior announcement and anti forestalling measures.

No one knows exactly how it will be implemented, or what the legislation will look like, including the Labour Party themselves. It will need to be drafted extremely carefully to avoid unintended consequences (I suspect in reality they’ll blindly implement it and worry about unintended consequences later, such is their hatred for parents who pay for education to give their children the best start they feel they can offer them; often those who have been failed by the state sector)

As far as I understand it, it can be backdated to the time of announcement. And they can't actually announce it till they've been elected. So I think assuming they are elected after September but before January, if they immediately announce it on being elected, then make the change in the first budget, it could be applied to any fees paid following the election i.e. Jan 2025, but not before the election.

No it isn’t. Any VAT charge would have to be added to invoices and billed to parents. The only way of mitigating the effect on parents is for schools to reduce their fees somehow. In reality, I don’t know how many schools can afford to do that in the current climate.

Yes, I think you are right. But schools can apparently claim some VAT allowances so eg. the IFS are assuming the net impact on fees will be something like 15% rather than the full 20%.

In practice it won't, because they will restrict it to schools, and they will need to include definitions (so schools can't evade by hiving off activities currently covered by fees)

It won’t be that straightforward in practice. Boarding schools for example include an element of charges for boarding/lodging, which is exempt under a separate part of the legislation.

That’s correct. Schools will be able to reclaim input VAT which they can’t currently do. Ironically, those who can claim the most back will be the wealthiest schools; those with the largest capital expenditure. It’ll be the cheaper schools with the less wealthy parents who will be proportionately hit harder.

If they applied it to uni then they’d have to change how much students can borrow as loans. The student loan system is problematic but I’ve not heard any party propose changes.

Oh sorry, I don't for one minute think that all private school parents are wealthy, we are ones ourselves (and I won't lie, I'm breathing a HUGE sigh of relief that we're paying our final term's fees for our youngest child on Monday, so won't be impacted).

It's just that I thought that the reason that this policy was popular is fundamentally politics of envy, and the public's desire to bring down what they perceive as the super wealthy. Wondering how people feel when they realise that what they are voting for could impact them personally via 20% uplift on nursery fees, extra curriculars, uni fees, tutors etc...

Except the IFS report is now being challenged and discredited for not taking into account several important factors

Yep. Well as with Brexit, they will find out when it starts to affect them directly.

In theory, if VAT is applied to school tuition fees, then all types of tuition, including those at colleges and universities, would also be subject to VAT, assuming the educational institutions are VAT registered. However, this likely would not extend to services like music, dance, or private tutoring unless those tutors are also VAT registered.

The broader implications of such a policy change on university tuition have perhaps not been fully considered. I imagine it would take years to have this in place. The focus on this issue may stem more from political motivations, particularly if viewed as part of a class conflict driven by the Labour Party, rather than a genuine effort to enhance the quality of education in state schools. It's all influenced more by political strategy than educational reform.

I think it's true that the IFS study is in some ways questionable, and I thought the follow up report by the Adam Smith institute was more credible, and there is also a third paper by EDSK which also made good points.
But I think the broad picture that there are VAT allowances that allow the schools to recoup something so it won't be the full 20% is valid, though all figures at this stage are uncertain.

The core of this policy is to mess things up don't they?