Private School Fees plus VAT

[ApplesOrangesBananas]

I am looking at schools for DC to start next year. I have read some articles that said parents were getting ahead of this rise by pre paying for numerous years in advance. Obviously we can’t do this yet because DC hasn’t started yet.

I’m curious has anybody who has children at private school been told what to expect yet? Will fees go up 20% or will they “half it” with parents and only go up 10% etc?

This increase is something we need to factor into account when exploring schools.

Also this is not a thread for you to bash private schools and write things such as “choose state school instead like the rest of us”... if those are your opinions then please find a different thread instead. I purely want to know if any parents have received communication regarding a fee increase yet? Thank you

I think paying in advance would feel really risky - children move schools for all manner of reasons, not just financial, and if you have a child who is unhappy would you get your money back if you paid a few terms in advance. My goddaughter moved from her boarding school after a term because of bullying - would they have got their money back if they had paid a lot in advance? As it was the school tried (unsuccesfully) to make them pay the next term, but as they were responsible for not taking sufficient action over the bullying they couldn't enforce it. I would feel very worried about paying a few years in advance as these are businesses and you sign a contract and it is very difficult to get empathetic treatment from them if your child is unhappy and has to be removed.

Hi OP

I have two DCs in private secondary.

We have had a communication from the governors - they need to give at least a term's notice of any fee change. So they wrote to us in March (with the regular annual increase - which was higher than normal) saying they intended to bear some of the cost of any VAT added initially, such that the full 20% would effectively be phased in over 3 years. They wrote again before the summer (when the election date but not result was known) to say that this phasing would not begin until Jan 2025, even if the King's Speech next week indicates immediate implementation for Sept 2024.

I do not think you can expect it to be "halved" in general.

@ApplesOrangesBananas it could be that the school you looked at is already registered with the relevant financial body so they are happy to keep and hold money.

But I would only do it if I'd thoroughly researched the school's situation.

For example DH knows of two local schools likely to go under in the next 1-2 years but on paper their circumstances don't look so bad.

Our school has said, due to refurb work already scheduled, they will be able to offset VAT for at least one year, and possibly two.

Fees are rising by 4% in September (already got the invoice). DS's scholarship discount won't be reduced.

They've changed the invoicing process so school bus and food are invoiced separately (vat free), and the pta will take over most of the extra-curriculars from Sept so they won't be affected either.
DS only has 6th form left so I may be lucky & get through without paying the extra which is a relief.
An independent nearby closed last week so we've picked up a lot of their pupils.

Now we are getting into the fun of "time of supply" rules in the tax code.

At the moment (to simplify a bit), if you prepay for something then the VAT due is whatever the rate is at the time of prepayment, not at the time of consumption.

That could be changed though, and may well legally be successful as it's an interpretation rather than a law.

By convention, parliament is extremely hesitant to write laws that have retroactive effect. It's seen as fundamentally unjust to change law in the past. But changing time-of-supply rules is not quite the same as that, and would have the same ultimate effect of making pre-paying useless for avoiding VAT.

It's not evasion though. The current rules are pretty clear. They are rules that can change though.

Thank you. It would seem on the whole from reading this thread that we should add an extra 20% at least to any of the schools we consider.

Some schools might be able to get around it for a few year it seems but not any more by the time we are in the thick of it.

This is such a ridiculous comment!

You genuinely can’t understand a government stating that VAT for services should include education services?

School fees tend to go up every year, so if you can’t afford it comfortably, maybe don’t do it?
No need for the handwringing of how sad it is that relatively wealthy families will have a bit less spare every month.

Regardless of the morals of the issue either way, I'd think this a risky strategy unless you are very sure about the financial stability of the school.
Obviously I understand that schools are unlikely to advertise their financial difficulties as they would effectively be hammering nails into their own coffin so you need to be quite cynical I think.
Two independents in our area have closed in recent years. We had children at one and saw it coming and moved. I thought it was fairly obvious but lots of parents couldn't or wouldn't see the signs. To be fair, the Head didn't deny anything when we said we were leaving and the remaining parents got a reasonable amount of notice. But the other school hid things very effectively si it was a bolt from the blue for the parents and closure was very rapid.
I don't think I would be handing over multiple years worth of fees to many schools right now.

Yes, assume the 20% and then be surprised if it is less, rather than vice versa!

Not a ridiculous comment at all. But this is not the place for THAT debate. You can find another thread for that.

That’s a good way to look at it

It's been announced in the King's Speech today - I'm not sure if a formal timeline was put on it or not.

I think it's best to plan for the worst case scenario - 30%
In the last few years our fees have risen between 7-10% annually

I think you should model it into a spread sheet - assume a 5% annual rise on fees plus 20% on top of that - it is cumulative.

Then also check that you are happy with the concept of the school becoming insolvent overnight and that there will be local state schools that could take your DC.

There is a massive drop in the birth rate and lots of private primary schools will struggle with the combo of that and VAT.

There is no generalising what schools will do - by law they have to add 20 per cent on to the fees they charge. They may be able to bill separately for meals, transport, after school clubs, extra curricular and make that more optional - so every parent ends up paying the services they specifically choose. At the moment, most preps and secondaries bung it all into the school fees price for simplicity’s sake.
Most likely there will be academic school fees, optional extra curricular people sign up to on a yearly basis, meals separately etc etc

The very large rich schools will plan their building programmes around the VAT so that they can deduct VAT they pay out from VAT they charge. So some are delaying for now so that they definitely get that benefit.
Many are sending out questionnaires to their parent groups asking them what they would like to see cut and where their priorities lie. Strangely enough many parents do not care about huge fancy buildings but that is exactly where VAT can be deducted.
There is one school local to me that wanted to go entirely green (including the swimming pool used extensively by the local community) but that attracts zero VAT so they are now not doing it! Talk about poor Government policy decisions.

There is one school local to me that wanted to go entirely green (including the swimming pool used extensively by the local community) but that attracts zero VAT so they are now not doing it! Talk about poor Government policy decisions.

on the contrary - this must be very rare and setting policy to carve it out would be a poor decision.

Totally ridiculous comment! It’s not a debate though. Nothing against private schools, but if you can’t afford the fees with the potential 20% addition for VAT, make another plan. The meals,
uniform, music lessons, expensive trips etc are more of a financial burden than a moderate (and appropriate) fee increase.

Most independents are small not for profit organisations.

I disagree - my VAT will be over £4k and there has never been a year where I have spent that on music lessons, trips and the difference between school meals per diem and, say, a Tesco meal deal

Presumably the local community pay to use the pool? Our local indie generously lends its facilities to the local community - at a pretty hefty charge. And most of the facilities were helped to be built by millennium funding.

I paid 4 years worth at the beginning of last term, with increases factored in (and including DC’s bursary) It’s been suggested that the annual increase this year and next is 12%, with the following 3 years between 4-6%. Then plus the VAT on top, whenever that hits,

In case you didn’t know the cost of private schools ranges from 15K up towards 50K per annum… they don’t all cost the same..

The reason I find this policy upsetting is because of the disruption to the children that have to move halfway through their education, after they’ve made friends and are perhaps studying for exams. This will surely have a knock on effect on their results and mental health. You clearly do have something against private schools or you wouldn’t be piping up.

@Labraradabrador

Surplus then, non profit still can take in more than they spend. Also look at what happens to "surplus funds"

Pre payment is a way to mitigate, BUT it's too late now as pre payment would have to be before labour came into power, as they can back date it.

It is what it is. The social divide will now become bigger.

Our school have said certain things can be VAT exempt so expect around 8-15%. Not the full 20%

I’d factor to pay it worst case, but I strongly don’t believe it will go ahead as there is legal issues with charging vat on education. I suspect it will get held in a legal battle and never heard of again. And Labour know it/

So you say you started the thread because you "purely want to know if any parents have received communication regarding a fee increase yet? " rather than making it a political thread. Yet you go on to give your own views against the VAT policy whilst telling others to get lost if they have counter arguments. Really?