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!

Adding VAT is not changing the school fees. It's you paying tax on a product you are buying, like you do on everything else you buy - food/petrol/alcohol/.....

The fees the school charges should remain the same. They will add VAT for onward paying to the government.

“ Or should we all rely on the "imagination" of some 12-year-old at the IFS?”

I have to say I do feel sorry for the young man who produced the original IFS report. Far too much reliance is being placed on it and that is not right. He should not be getting the blame if this all goes pear shaped.

No, overall about 10%. First year obviously depends what building they have done in the last 5y, but in general that they will offset about half by claiming things back.

Wonder if houses in outstanding school catchment areas will get a big price boost when it happens?

a) Labour won't do it

b) Even if they did, schools, like any business, can change their fees whenever they feel like it. Just check your contract! This happened in Covid, although generally fees were reduced.

@letsgoskiing - so instead of hiring staff private schools will be incentivised to spend on things that generate VAT so they can offset that? So more spend on computer and tech etc than staff? Automation? Green technology investment etc?

“Wonder if houses in outstanding school catchment areas will get a big price boost when it happens?”

Yes definitely.

And professional women who use private schools for childcare and extra curricular because they work 120% will be incentivised to use state instead and work part time to fill in the extra curricular/one to one needed to bring a child up to the same level. It is perfectly doable, I have done it myself. DCs cousins all went to private school. Mine went state and I supplemented and worked part time. Outcome has been the same, but I have had to DIY far more especially on the sports and music front.

The policy won’t lead to more equality. Might be less cash for the poor and definitely some state school kids will be displaced in the long run and poorer areas are more likely to become even poorer as nobody wants to live somewhere like that if you cannot even pay for education privately. Private schools won’t survive in poorer areas.

Private education simply gives some people more choice. If the sector is decimated, there will be less choice.

@Geebray - really, Labour won't do it! It's one of their only policies so far!!

The IFS assume it’ll be around 15% effectively, after input tax is accounted for. These figures will be different across schools - those with less capital expenditure for example (generally the poorer schools) will be able to claim back less. Schools with large capital projects such as Olympic size pools and state of the art technology will be able to claim back more. This is one of the reasons the policy is a ridiculous one; poorer schools will be proportionately hit harder and these are often the schools which cater for SEN.

It's the only one that they've stuck to because all the other ones turned out to be awkwardly expensive and they had to answer actual questions about them.

I still say they won't do it. Placemark me!

To get around it though and say the stuck to their pledge then they may, for instance, decide to charge private schools VAT at, say, 3%. Then they can still say they did it. No way will private schools be VATable at 20%.

Let’s not forget their other main policy - non dom status. Apparently private school parents and non doms are going to fund pretty much all of Labour’s spending plans……. The Conservatives have got in first and changed the non dom rules. Even The Guardian is writing about this being a bad idea. Going after the wealthiest in society (those that pay a huge proportion of the overall tax take) will never work.

https://amp.theguardian.com/politics/2024/apr/13/uk-non-doms-uk-labour-tax-plans

I really hope you’re correct. The optimist in me likes to think so. The realist in me thinks they’ll implement it at any cost because they hate the private schools so much. I actually think they’d implement it even if was going to cost the country money (which it probably will do).

I think that parents of privately educatied child should apply to their LEA for a state place for all their children just as the new government take over.
They can do this whether they intend to move children or not. It would be an ideal opportunity to see just how well the system copes. Although it is a relatively small number of pupils it may cause just enough disruption to make the idea fade away.

For some rural schools like our local senior school they would seriously struggle to accommodate the number of children in their catchment that currently go to private schools.
There are 3 large independent day schools locally and along with their feeder schools you would be looking at in the region of 5000 pupils looking for places in a relatively small number of schools.

I know that this would be theoretical, because not all pupils would be entered into the state system, but for this purpose if 50% changed and a couple of the schools had to close, going forward, several new state schools would be needed locally.

Converting existing private schools to state is a logistic nightmare since the buildings are often historic and grade 2 listed with high maintenance bills. They are not at the disposal of the LEA so cannot be sold off to pay for new buildings and would have to be leased.

I think that Labour really need to do some joined up thinking around this plan and really think about the consequences. The amount of money they will potentially earn could be quickly swallowed up by a huge budget required to accommodate a sudden increase in state pupils.

But then we know that some politicians seem to struggle calculating taxes and expenses so it comes as no surprise that they haven’t done their sums.

That makes no sense, if a school charges £1000 (low for the sake of example) at the minute it uses the full £1000 towards its costs. If education becomes vat able and it keeps the fees at £1000 then £167 of that income now has to be paid to hmrc so it only has £833 to pay towards it costs, unless it was making a surplus before it won’t cover costs (it can claim some vat back on its costs but this will likely be a lot lower than what it is charging re vat on fees)

or if you are meaning that they add vat to the £1000 so it becomes £1200 then obviously that does change what people are paying they are paying £200 more regardless of vat it’s for

They’ll prob just leave them without school places for months or years on end like they do with kids who need special schools, they don’t just build more

My (quite limited!) understanding is that the Treasury has fairly extensive power to make amendments to the VAT Act via statutory instrument. This includes amendments to the defintions of exempt supplies in Schedule 9 https://www.legislation.gov.uk/ukpga/1994/23/section/31 - BUT that any such change would (as you say) have to gain approval in Parliament (https://www.legislation.gov.uk/ukpga/1994/23/section/97). That said, approval for a statutory instrument is much more straightforward and speedy than primary legislation so it wouldn't necessarily require any significant parliamentary time.

I am no expert on this, and depending on what they want to achieve it might be too complicated to do in such a straightforward way, but I am not sure the approval process will be that onerous.

OP I think the basic answer to your question is that prices are assumed to be inclusive of VAT unless the provider of the goods/services make it clear that they are exclusive of VAT. By now any school that is competently run will have made clear in its terms and conditions that fees are exc VAT so that VAT can be added to the advertised fee if it does come in mid-year. It would seem unnecessarily disruptive for a responsible government to impose such a change during the school year but we have no idea whether Labour will act in such a way so it is probably best to assume they might.

Parents who thus far self funded more severe SEN will employ lawyers to get EHC in place.

Parents of children with more severe SEN are extremely unlikely to be self funding because a) this is the group for whom it would be hardest for councils to argue should not have an EHCP and b) even exceedingly wealthy parents are likely to decide a lawyer is cheap in comparison to fees of £150,000+ per year. However, your argument may well be true for milder SEN.

EHCP Tribunals cost the public purse over £100 million last year. Local authorities won just 1.7% of cases in 2023. That isn’t a typo, it really was one point seven percent.

Yes but as you say they can indirectly not pass it all on by reducing fees. Which they will potentially do (as I've read) by reducing their charitable activities/bursaries etc. And others have said the schools can also claim some of it back.

What I don't understand, when people are up in arms saying people choosing private must be ridiculously wealthy - you don't get the same kind of comments about stay at home parents? (Which are not exactly a rarity?)

School fees - £16k a year. Stay at home parent - lost earnings of 'at least' £25k a year, and in lots of cases much much more...

A Statutory Instrument still goes through parliament, albeit a quicker process than for an Act of Parliament. I'm not sure whether this requires the affirmative procedure (which means both the Commons and the Lords must approve for it to become law, although some SIs relating to financial matters only have to be approved by the Commons) or the negative procedure (which means it becomes law without a vote unless either the Lords or the Commons votes to block it). This isn't my field, but articles I've seen from people who know more suggest that the affirmative procedure is required.

Whatever your thoughts on private education, introducing VAT on independent school fees sets a precedent that education should and can have VAT added. Anything with VAT becomes more expensive for the customer eg the parent but ultimately punished the child if certain educational opportunities be that nursery, football training, or private school becomes more expensive. Children denied these opportunities also negatively impacts upon society as a whole. This policy is so short sighted and clearly made out of envy and also a desire for Labour to gain votes.

Yes that’s my reading of s97(3) and (4)(c)(iii) (ie this list of amendments requiring affirmative procedure includes change to exempt supply in schedule 9)

Yes, once the implications become clear then Labour will be all "Well we did want to introduce VAT on school fees, but now we have to look into the wider consequences". That will be their out.

I'm telling you, it won't happen.

@Quatty

”I find it hilarious that private school parents think that they’re going to march their kids into the good oversubscribed ones, they won’t. “

Which private school parents think this?

As another poster said, parents will hang on for a transition and will move house if needed ahead of eg a primary to secondary change, spending the spare school fees on higher mortgage payments. Friends with younger children than us, both in private primary, are doing this move right now ahead of 31/10/24 for their rising 11 year old.