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

It's reassuring to see that cutting teachers and/or teacher packages isn't on the parent radar. This seems to be the first port of call in many schools.

As regards teacher packages, a number of private schools are coming out of TPS as the default and offering it as an option vs higher salary now.

United Learning which is the huge academy chain which has the famous darling of the Benn family in it (Holland Park School) as well as well known private schools like Guildford High and a grammar in South East London, Newstead Wood etc is thinking of coming out too and it has been all over the news.

So you have these huge academy chains with privates, grammars, comps, primaries (prep and state) etc all in the mix and partnerships between them. If you hurt one arm, you might hurt the rest too.
Academies are run like businesses too and they want to hire the best teachers. And it seems they think young teachers may want cash now rather than wait for a really long time for the pension. Could this actually be true? I used to be really anti coming out of the TPS but if the job has changed and many are only in it for a few years of their career, is there actually another argument to it after all?

What will happen to the TPS if many academies do withdraw? Will Labour have to bail it out? So a potential uni crisis plus that? And some private schools going bust and being bought up by private equity from the Middle East and Asia.
It is all rather a mess.

I still do not understand how we in the state sector are going to benefit from the private sector VAT. I think our schools will become more competitive to get into and there will be less sports/music/drama provision available locally.

https://schoolsweek.co.uk/unions-demand-phillipson-intervene-over-united-learning-pension-plan/

@Araminta1003

And it seems they think young teachers may want cash now rather than wait for a really long time for the pension. Could this actually be true? I used to be really anti coming out of the TPS but if the job has changed and many are only in it for a few years of their career, is there actually another argument to it after all?

A similar thing happened in the early/mid 90s; colleagues/acquaintances opted out of final salary schemes because they needed the money to pay their living expenses. For me, 5% of a lowish graduate salary for 5 years has turned into a projected £100 a week at 60. Yes, TPS contributions are nearer 10% but I still think it's a better scheme, even for a few years - if you can afford it.

@Morph22010 say you had £300,000. That could pay the fees of one child from 3-18. It’s increasing by 20% so now you’ll need £360,000. By investing it, you can use the profits to pay fees now. You are also growing the capital so in 15 years it’s likely your initial £300,000 would be worth more.

If we just paid the VAT out of savings, our savings would dwindle over time. This way we are using savings to provide an income that will cover most of the fees and VAT whilst growing our savings. Nobody in my child’s year is taking their children out of school, everybody is looking for ways to increase their income without working more hours. Most are doing this through property investment. Our children are all 4/5 so we’ve got a lot of years ahead.

How much post tax profit are you expecting to make on a £300k property per annum? If it’s in a company you’ll have to pay corp tax on the profits at 19% (assuming company qualifies for small company rate 25% if not) then you have to pay tax on the money you withdraw from the company as dividends or salary. It’s this net amount after corp tax and personal tax that will need to cover the fees. Are you sure you are going to be making enough off a £300k property per annum to pay the annual fees? Plus there are costs associated with rental property. I do tax returns for people who have rental properties including student lets and none are consistently making a £22k profit after tax and costs consistently every year over a period from a £300k property. It’s not necessarily a bad investment but it can’t be relied on to generate income for school fees if there is no contingency plan to have other funds available.

Our school has said they will try to mitigate the VAT rises. They will try and claim on capital expenditure. They will also cut bursaries. They will cut peripatetic staff mainly music and drama staff). They will cut the usage of the theatre, sports fields and the various breakfast and holiday clubs that were provided to the local community.

slow hand clap to the Labour government to be honest.

My DS1s Year 10 class had 52 pupils in it. 6 have left. Granted 1 was to a boarding school and 1 was to an international school because of being part of a military family. The others have said that they just cannot stretch to it. This was immediately before or just after the election and I know that DS1's best friend's parents have not yet decided if they leave but 'probably will'.

It's anecdata sure. But - whatever. Statistics are always made up of quite alot of anecdata.

We have not decided yet.

duddims.
poor Algie

The local community would have paid to use those facilities, and they aren't cheap

They will need to be careful about cutting the bursaries and use of facilities by the community if they are a charity. If they are a charity they have to demonstrate public benefit and just providing eduction to fee paying students isn’t enough to keep their charitable status. The loss of charitable status could end up costing more than they save on the burseries and use of facilities. I don’t agree with vat on fees by the way but I’m just stating facts.

The main advantage seems to have been the reduction in business rates. When this is abolished, what will be the advantage of being a charity?

No. They did not pay to use those facilities. I am a school governor and say that will full confidence and knowledge.

Does anyone know if private schools can easily give up being a charity? Do they just need the Charity Commissioner’s consent? And who would then own the assets?

Let’s say small prep with valuable land cannot run profitably anymore and merges into a family of schools (still charitable) can the richer schools in there just take the assets and commercialise them from the prep and use the profits for “education” in the group? I feel this tax is incentivising them to do things like this!

Well the main advantage is they don’t pay corporation tax on profit/surplus. I know that most private schools aren’t profit making in the true sense however not all of their costs are deductible for corporation tax so they may have to pay corporation tax on their taxable profits for the year. So as a very basic example (the figures aren’t representative of what actual costs might be they are just for the purpose of the example so over simplified to demonstrate the point).

Say their fees income for the year is £1m, they spend £500k on staff salaries, £300k on other costs so heating, lighting, educational supplies tax and £200k on building a new classroom. The building of the new classroom is capital expenditure so it is not deductible from profits for corporation tax.

so in this case the schools taxable profits would be £200k (£1m less £500k less £300k). Corporation tax at 25% of this is £50k. Obviously schools would have to calculate based on their own budgets to see if it’s worthwhile being a charity but they’d have to make the choice as a long term decision they couldn’t opt in and out of being a charity from year to year as it suits

You say your thread is to find out what communication other private school parents have received ed about the increase. You then post several times saying that the picy is wrong. When someone dares to say they think the policy is right you tell them this thread is not for that debate. Puzzling.

Surely they'd get capital allowances on the building? Otherwise a £200k building is costing £250k.

In reality, surplus at my school is running at 3% and the debt is colossal. If only we'd had ready cash with which to build.

Yes capital allowances on building at 3% per annum if criteria are met so the first year that would reduce the 50k tax by £1.5k.

there are certain things within the building for which capital allowance could be claim at a higher rate but in the main the building costs you don’t get a lot of tax relief that’s why it’s the main advantage of being a charity for a school,

in reality as you say it won’t effect the cash strapped schools so much as they prob don’t have money for capital projects anyway but the more wealthy public schools won’t be giving up their charitable status unless they have to!

For those following this thread. This article came out yesterday.
https://www.thetimes.com/uk/politics/article/vat-on-private-school-fees-expected-as-soon-as-january-rx5wp2p3w

So you're 'loving' Welsh parents being priced out of the London Welsh school (which will probably gave to close)? Jewish parents having to pay VAT (as well as covering the security they need on the door)? You're 'loving' the tax on parents who choose Waldorf Steiner schools? Private covers a wide range.

Yup. No one needs to go to a fee paying school.

I am LOL at this quote from Reeves “And who are the children today who are not able to fulfil their potential? They are the kids in classes with teachers who are not qualified. They are the kids who are in [pre-fabricated buildings] because their schools are literally falling down. You have to make a choice about where your priorities are.”

Yes, that’s exactly the situation we were in. Absolutely exactly (but add in arson, horrendous bullying, and no head teacher too). So we made our choice. And now you’re adding VAT onto it to add insult to injury.

I am! I don’t care what school it is. I support and celebrate the VAT rules being brought in. It’s FAIR

Yeah. It's entirely fair that Jewish people pay a tax for being Jewish. Plus extra for the security that they need on their door. They're, like, obviously getting a MUCH better education than everybody else and taking over the worlds and stuff. Plus all those Waldorf kids. Making wool art pictures is an absolute sure fire way to make it to the top of society. And what kind of posh pratt wants their kids to speak Welsh? Stick it to the bourgeoisie. Yeah!

So eloquent 😐

See above. Next you'll be telling me that nobody needs to eat pot noodles. Just because you can't see the need for something, doesn't mean it's not useful.