Phew! VAT outcome….

[EverythingAllatOnceAllTheTime]

To all those fellow private school parents worried about fees, on Friday our DC’s school advised they will be passing on 8%, with overseas students being liable to ‘differential pricing’, taking the pressure off UK based students.

This is a great result - fingers crossed others schools are able to manage the increase similarly.
Best of luck!

That 8% is on top of fees rise though and only for next year?
Sorry I don't take this as a win. A win is getting the policy scrapped and that's what ENT are fighting for. Each school will be different so some may have to pass on the full 20%

That 8% is on top of fees rise though and only for next year?
Sorry I don't take this as a win. A win is getting the policy scrapped and that's what ENT are fighting for. Each school will be different so some may have to pass on the full 20%

Yes, thé 8% is only in respect of the VAT increase - the board of governors had already been told not to attempt to hide some of the vat in the general annual increase, and yes its basis next years fees only.

Sadly, I am not confident that the application of vat can be successfully challenged. How do the ENT plan on doing so?

The first year was always likely to be tempered by the ability of schools to reclaim vat spent on capital projects going back a few years once they registered for vat. The full 20% increase is likely to come in subsequent years, unfortunately.

What’s interesting in our DCs school is that international parents are being clobbered with higher fees, and are evidently subsidising UK-based students.

Stop it already. 20% is the rate of output VAT. If you charge standard rate output VAT you can recover input VAT. Many school supplies and services will have VAT on them. Whilst you’ve all being jumping up and down in indignation and horror about this you never stopped and did the arithmetic.

So let me say it for you one more time:

any school adding 20% to your fees is profiteering because VAT is a value-added tax so you can recover your input VAT against the Output VAT you are required to charge.

ffs get a coffee, go to church and pray for peace and quiet like I’m about to do.

Then FFS don't post something inviting comments!
70-75% of the school budget is staff which they can't claim against.
The VAT is a tax on parents not the school so maybe it's you who don't understand. The school collects the VAT from parents and then passes it on to the government.
Don't tell me I didn't do the arithmetic, we are working with leading economists.
If you can afford fee rise + any % of VAT on top them great for you but many can't.
Schools will most likely temper the rise in the first year or so and then gradually increase it.

I’m afraid you are simply incorrect NowItsMeMyselfandI. Every school has to add on 20% to their fees. They can seek to minimise the impact (and are indeed required to as businesses) by reclaiming VAT they have paid, but for many schools who have not done large capital projects in the last few years, this isn’t a large proportion of their costs. If say 20% of their costs have vat added (salaries, pensions don’t obviously) they can reclaim 4% of their overall costs. They can take this vat reclaim of 4% off their base fees and then will add 20% VAT on top. In reality, once you add business rates to the mix, the 4% “saving” will likely vanish.

Let’s hope indeed that the policy can get scrapped eventually before too many independent schools are forced to close.

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@ComeonChortle

Yes everyone has to charge the VAT to their net fees but they can hold the net fees or even reduce them because they can now reclaim the VAT on supplies, and far more crucially, building works which they can backdate to cushion the effect. My neighbours school (shes deputy head) is holding fees this year when typically they rise by 5% plus meaning the effect to parents is 15% this year, she says they have calculated that they can hold fees for 3 years from the VAT reclaimed.

. My neighbours school (shes deputy head) is holding fees this year when typically they rise by 5% plus meaning the effect to parents is 15% this year, she says they have calculated that they can hold fees for 3 years from the VAT reclaimed.

Foregoing a 5% base fee increase for 1-3 years isn’t amazing, TBH! But everything helps.

Not all schools have done building works in the last few years. Indeed, some may have waited a little knowing the new Var policy would help in future works.

Statements about profiteering are nonsense. Let’s not forget increased pension contributions on salaries would be contributing to base fee rises without the VAT issue.

That is impressive and great news for those parents at your friend’s school. However I don’t think that result will be common. There are lots of cost pressures coming: the state sector giving teachers large pay rises (private school teacher pay will have to rise to be competitive), energy costs rising further, business rates. I know some schools are lucky and can claim back for large capital expenditure in the recent past, and cut costs (sadly bursaries, extra staff etc), but a lot won’t be able to that much especially those without the flashy new buildings etc.

Plus a 20% rise is still a massive rise year on year to fund for some parents, even if they were expecting 5% rise.

That’s great for you but both my DC schools are only going to be able to absorb a couple of percent ; both have sent letters to advise that they will effectively be passing on 18%. On top of the 5% fee increase for the 24/25 academic year.

Is the differential pricing for overseas students based on the fact that they might not mind as much because the pound is so low historically speaking? And how many international pupils are in your school? Is it a full boarding and a day school? (Quite specific structure?) Can the school just up the boarding element too for example to cross subsidise day? Many boarding schools don’t charge enough extra for the boarding element. Eg if state grammar like Cranbrook charge 18k for boarding then many top public school could charge more for the boarding element?

In addition, charging VAT on boarding in itself might be challenged in court? It’s basically childcare and they let state boarding schools off.
I think private schools are going to have to become very flexible to navigate this period and cost cut quickly where they can whilst working really hard to keep parents happy too.

@EverythingAllatOnceAllTheTime

if you can still afford the fees this year, take that as a win. Ignore all the various opinions on it & what they can/can't do. Theres just no point in trying to work all that out.

see what happens this year, personally I don't think KS is going to succeed with this & will be put back in his box. But that's just my
opinion.

We have a high proportion of overseas students, and a fairly large boarding cohort. I don’t think it’s an FX issue as the pound has recently strengthened. I think it’s simply politic for the board of governors to implement ‘variable pricing’ for overseas students.

I accept that not all private schools share the same
profile. Our youngest has two years to go so we will be able to absorb this without issue. We also cut some bursaries we were funding for other students.

I also struggle with those who argue this VAT increase can be legally challenged - I hope that I am wrong.

By way of context, I now see that there is also a piece in the MSM re variable pricing for overseas students, so it’s conceivable it’s more widely spread.

Regarding the additional fees for overseas boarders, i first noticed it last year with Brighton College charging a large increase on full versus weekly boarding. It seemed to us aimed at overseas students who can’t go home at the weekend and are (possibly, and at least often presumed to be) price insensitive, whilst keeping numbers up on the Home Counties contingent there. I think other schools may follow that path if they can.

My personal opinion is that they have done this half way through the school year on purpose. If they said it is from September 25 so many people would all be moving into state schools at once and the blame would be firmly and evidentially at their door. Like this, it will be more of a trickle effect and they can try and blame it on other factors like inflation, cost of living and the recession we might all be facing quite soon.

I am applying for state grammar this autumn. I can tell you all very clearly that this year schools in London like Wilson’s and Newstead Woods and others have had a huge difference in waiting list moves. It’s discussed on the 11 plus forum.
Much less movement as private school parents are going for grammar. We did the mock tests locally and saw lots more than usual from private preps. Obviously grammar is far cheaper than having to move house and pay stamp duty. These are people living in expensive houses often with other properties let out and they probably could afford the VAT, but they don’t want to pay it! Maybe Reeves should be considering the fact that people can choose not to pay it and take the state place. In addition, this is my bubble of course, but speaking to a lot of them who are Indian and in medicine or IT, they feel taxation is too high already. And I think the IT sector isn’t as strong in some areas as it used to be so maybe they don’t want the risk of losing their jobs plus private school fees.
If I had known this I would have put my older one in the state grammar with the sibling policy rather than the superselective. I know my youngest is going to be fine either way, but it still annoys me that they haven’t considered all the implications. The winners are those in the best comp catchments already - they get a huge windfall on their house price value. Should be taxed!

Ours have indicated they can absorb 10% minus any regular annual fee increase next year. It will certainly help those who are near the end or near a natural transition point hang on and minimise disruption to their child’s education, but agree with @Araminta1003 that the whole effect is just slowing down the departures.

as a parent of 2 still in primary, the cumulative effect of vat is pretty disastrous for us financially. Our complicating factor is SEND, which is exceptionally well catered to in our current Indy- getting our ASD diagnosis was actually complicated by the fact that with so many adjustments in place proactively by the school it was difficult to assess level of disability. It was openly discussed during our assessment that in most state schools they would need to see evidence of her struggling for at least a year (likely more than that based on stories from our local send support groups) before accommodations would be offered. We will hang on as long as we can rather than see dc struggle, but with intake drastically down at our school, as well as a steady drumbeat of families leaving for financial reasons, I live in fear that our junior school will become unsustainable and might close regardless of our own ability to stump up vat.

One school have told us they expect fees to increase by 15% in January
Other school still doing their sums

It's unclear what effect the removal of business rates relief will cost - that kicks in in April

You make some valid points.

There's no way a legal challenge will stop the policy so anyone holding their breath on that is misguided.

Schools could cut their fees and account for vat out of what you already pay. Tamara might have to lose a pony lesson or two, though.

We haven't had any official announcement but I have had a fees schedule for next year and its gone up by around £100 per month. I have not worked it out exactly but I think its 10%
Day school in Yorkshire that wasn't a charity

Our children’s schools have said they cannot absorb it and expect to be passing on 20% in full from January, on top of the regular price increase.

We have been holding off on an international move but this has been the nudge we needed, the fee increase more than an extra 10k per year out of net income.