PS VAT - international reaction

[AlbionLass]

France and Germany attack UK plan to levy VAT on international school fees
Proposal to impose value added tax in the Budget risks damaging diplomatic ties, ambassadors say.

France and Germany have hit out at Sir Keir Starmer’s plan to levy value added tax on private school fees, saying the policy risks forcing hundreds of children out of international schools and damaging diplomatic relations with the UK.

I wonder how this will square with wanting to be closer to the EU?

The less money the Government can prove in court that they will raise, the weaker their defence. I am assuming that some schools at the top end are passing on the 20 per cent in full precisely because they have a huge amount of VAT reclaims and a large proportion of prepayments before the deadline and they know the press will be all over this in due course.

In any event, any child moved out of a state school already due to SEND who has an official paper trail and is now proven to be better off in a private school with their needs met - sending them back would in my opinion cause a risk of irreparable harm to that child. I would expect a reasonable judge to agree. Money is never going to be full compensation for a Government deliberately harming a child’s mental health. It’s common sense.

One of the ambassadors stated they expect 25 per cent of parents to be priced out. I am going to assume that an ambassador will be relying on some actual evidence before making such a statement in public. So yes, it’s going to prevent some kids from attending. And it’s therefore pretty offensive diplomatically speaking, in my opinion.

In any event, any child moved out of a state school already due to SEND who has an official paper trail and is now proven to be better off in a private school with their needs met

So you are talking then about injunctions ok
a case by case basis? In a specific situation where:
a child has SEN;
and the parents are paying the fees but could not afford the 20% increase;
and the child has moved from state to private;
AND the child has paperwork (not sure what paperwork would qualify here) which proves they are better off in private

Is that what you mean?

So yes, it’s going to prevent some kids from attending. And it’s therefore pretty offensive diplomatically speaking, in my opinion.

I am glad you’ve moved away from “breach of international law” to “diplomatically offensive”

I agree that it will have a minor diplomatic impact, but no more so than many other things governments undertake and considerably less so than eg matters of border policing in the channel.

Thank you!

No, personally I do think it is a breach of international law and the rights of the child. However, I also think the French and Germans have more important beef with the English. From their tone, I think they see this as a British class warfare issue. They have their own legacy issues akin to this. This is a political heritage issue, not a proper revenue raising tax (however they try and frame it - law is about substance, not how something is represented politically). And before ambassadors make statements they will have concrete evidence/advice.

No, I was not talking about individual injunctions. I am hoping the courts rule that this tax to be unlawful for children with SEND and put an injunction in place for such DCs pending further investigation as to how to prove SEND (ie practicalities).

No, personally I do think it is a breach of international law and the rights of the child.

I should have been clearer. I am glad you have moved away from this position ie that leaders/diplomats from other countries considered it such a breach.

It came from leaders in other countries! So clearly they don’t like it one bit. It is a breach of international laws that they respect and have signed up to.

I know that it is your personal position that it is.

No, I was not talking about individual injunctions. I am hoping the courts rule that this tax to be unlawful for children with SEND and put an injunction in place for such DCs pending further investigation as to how to prove SEND (ie practicalities).

Again, I will bow to @prh47bridge on this, but I don’t think that’s how injunctions work.

I do think Labour could have handled this better - of course, I have an element of self interest in saying I wish they had announced now but introduced in Sept 2025 🙂 - but I think that would have given schools, parents and LAs a more sensible amount of time to plan for the change.

I don’t know the detail of the legal challenge announced today on behalf of the ISC.

But in relation to the existing one brought by a mother of a SEN child/children, this is not how it works.

If the challenge succeeds it will mean that the court issues a declaration that the measure in relation to SEN children only is incompatible with human rights law.

This does not mean that the VAT measure will be struck down by the court as unlawful or that any VAT paid on school fees has to be refunded to the schools or the parents. I’m not aware of there being any legal basis for seeking an injunction either.

What would instead happen is that the matter would be remitted back to Parliament to debate and to work out how to amend the law to make it compatible with human rights law.

I’ve no idea what that might look like as it’s a political as much as a legal question, but in theory I’d have thought that providing better support for SEN children in the state sector may be enough.

This is obviously for SEN children who don’t have an EHCP naming a specific independent school, who are already exempt.

In relation to the ISC challenge just announced all I can say is David Pannick KC who is acting for the ISC is absolutely phenomenal. It’s no guarantee of any success of course, but he should be able to advance the best possible case.

The only reasonable thing for courts to do is stay the VAT pending further investigation into the legality of the tax. The alternative is complete chaos for private schools- if they don’t know who will be exempt or who will not, they cannot operate lawfully. If SEND children will be exempt, there has to be an objective criteria to assess that SEND.

It is not my area of expertise (IAAL) but my understanding is that this just not how it works I’m afraid, ie it’s not within the court’s power to do this.

It seems the ISC is claiming mainly on human rights grounds, in which case your earlier post as to what will happen if the claim succeeds is likely to apply. The courts cannot strike down legislation, simply declare it as incompatible with human rights law. The legislation remains in place and enforceable even after the courts make such a declaration.

If this is right, there will be no chaos even if one of the challenges succeeds. Independent schools will still have to charge everyone VAT until such time as the government amends the rules to comply with human rights law.

So glad to see @TheWrongBus commenting as a lawyer on this, as it really didn’t seem like this “ask” was anything close to being in the power of the courts.

And thank goodness, frankly. We elect a government democratically and they pass policy if they have sufficient backing in parliament. If courts could pause any and all new legislation just because someone was challenging a part of it, how the heck could we run a country?

Remember, in 2019, Parliament stayed prorogued whilst the legal challenge was being heard, and the prorogation was only lifted when the challenge was won.

If the courts don’t stay, (the ECHR did for Rwanda plan) the 100k kids with SEND in private schools are charged VAT and then a proportion of those will have to be moved out of private schools and the mental health impact cannot be adequately compensated by return of the VAT? The ISC hold all the cards as they have data on the SEND?
The more worrying impact is the political repercussions for Starmer as a human rights expert? That was my worry all along. We have been staring the obvious from the start. I would be offering all those kids priority admissions into state schools?
This is partly political and they should handle it?

I would be offering all those kids priority admissions into state schools

What would priority admissions look like, to you?

(leaving aside that this could breach other rules and regulations around admissions codes and be very much open to challenge!)

@SheilaFentiman in normal admissions rounds at usual points of entry the evidenced SEND does get priority. The Government have chosen to intervene with an anomalous policy which is potentially discriminatory towards those children so they need to mount a proportionate offer in return. Either a VAT exemption or prompt offer of places with no delays in state schools were needs are promised to be met. It is common sense.

Either a VAT exemption or prompt offer of places with no delays in state schools were needs are promised to be met. . It is common sense.

A lot of things that you consider to be common sense/only reasonable/only fair are counter to the way the rules work though (which is ironic when you are setting so much store by a legal challenge)

If a school prioritises medical and social needs in its admissions criteria, then if the particular SEN that a child has falls under those criteria, and the child applies at the same time as one without SEN, and there is one space in the year, not two, then the criteria will do their job.

If a school doesn’t have such criteria or the SEN (eg dyslexia) doesn’t meet the needs criteria, then the applications must be sorted by the other criteria eg distance, siblings etc.

Because anything else would be a breach of the admissions code, which the government cannot just set aside.

ps this is too much of a blanket statement - not all schools and not all SENs

the evidenced SEND does get priority.

“It seems the ISC is claiming mainly on human rights grounds, in which case your earlier post as to what will happen if the claim succeeds is likely to apply. The courts cannot strike down legislation, simply declare it as incompatible with human rights law. The legislation remains in place and enforceable even after the courts make such a declaration.
If this is right, there will be no chaos even if one of the challenges succeeds. Independent schools will still have to charge everyone VAT until such time as the government amends the rules to comply with human rights law.”

My understanding was the new Finance Bill gets issued (when will that be exactly?), then an ISC claim may go to Judicial Review “on behalf of parents” with Lord Pannick KC leading the case and the High Court in theory has the power to issue an interim injunction/stay if damages cannot be a reasonable compensation for children with Eg SEND.
As the case may take a long time for all evidence to be heard, this representing potentially months/even more? and an important chunk in children’s life proportionally and vital to their education, convincing arguments may be brought for a stay pending the full case? An interim injunction/stay is not striking down legislation?

We need to remember we are talking about actual children here. How exactly are damages going to be a compensation for possible educational interruption bearing in mind all the public evidence we have of 1) Covid school closures and their detriments and 2) the recent damning report on SEND by the National Audit Office.

And I am sure the Government will argue this is a simple tax matter. And I would expect there to be public policy considerations on allowing a judicial review of this sort of claim. It does not sound like the ISC took the decision lightly to bring such a judicial review. And I understand there are other legal challenges too.

Lord Pannick KC seems to have been involved in pretty much all the controversial big cases of this nature in recent history. I doubt someone of his standing would take on such a case without a reasonable prospect of success. I also highly doubt the Government did not expect something like this all along.

The Government have acted unreasonably in the time line and failing to engage aka mediate with the private sector from the get go. The Education Secretary has made unprofessional comments about children in private schools on X etc. It has hardly been well planned, thought out and in the best interests of children nor the tax payer? The Finance Act has not even passed and private schools are meant to be issuing bills with VAT to the parents of children in the next few weeks? Half way through a school year? It is not just SEND children it is also all children in Years 10/11/12/13 that the impact could be immensely harmful for in the long term not to be compensated for by damages.

The Finance Act has not even passed and private schools are meant to be issuing bills with VAT to the parents of children in the next few weeks? Half way through a school year?

Schools knew that the introduction would be in Jan before the start of the school year. Judging by other threads, some (including mine) but not all have already informed parents of what they expect to bill in jan eg if they are adding 20% to the current base fee or tweaking the base fee down in order to have a net increase of 15% or whatever.

As I said above, it would have been cleaner to introduce it at the start of a school year, but it certainly isn’t impossible to do mid year

@Araminta1003 like it or not, the Labour government were elected with this policy clearly stated in their manifesto. They can therefore claim a democratic mandate for the policy. The rest is mechanics.

Introduction of changes after the budget covered here:

commonslibrary.parliament.uk/what-is-the-budget/#:~:text=At%20the%20end%20of%20the,the%20ways%20and%20means%20resolutions.

For example:

When are Budget changes implemented?
After the Budget speech, some changes to, or continuations of, existing taxes may be introduced on the same day. A common example of this is changes to excise duties, such as tobacco or alcohol duty. Immediate changes to taxation happen if MPs approve motions under the Provisional Collection of Taxes Act 1968.
Any new tax, changes to existing taxes, or any provision that has to start operating before the Finance Bill is passed have to be covered by a ‘ways and means resolution’. This includes changes implemented at the beginning of the new tax year (on 6 April). Each tax measure will have its own ways and means resolution.
These resolutions need to be approved by Parliament within 10 sitting days of the Budget. An example of this is income tax. The government’s power to collect income tax must be renewed each year in the Finance Bill. The approval of a ways and means resolution means the Treasury can still legally collect income tax when the new tax year starts, even though the Finance Bill has not become law yet.
Other tax changes may not be implemented until much later as set out in the Finance Bill.

@SheilaFentiman - clearly the Labour Party has intended to do this for years, has ample evidence and legal advice fully prepared and there will be zero problems defending the judicial review claim in full in December before the courts close on 20 December? They won’t need extra time to instruct or prepare a case or defend a stay request will they, because they have been planning this carefully for years.

And they have an army of HMRC officers lined up to deal with the VAT reclaims and ample credible evidence on Twitter from heavyweights such as Dan Neidle and their own Education Secretary. So this should all be very straightforward for them as it was fully costed and fully planned in their Manifesto all along and as a human rights expert himself, Sir Keir knows exactly what he is doing.

@Araminta1003 i am not sure what your point is? As with every new policy there will be some work in implementing it eg training new staff etc.At the risk of boring myself with repetition, this is simply the BAU of government.

I would imagine contingency planning both before and especially after the election win would have involved response to any potential legal challenge.

Again, any legislation passed on any topic will potentially be challenged and the government employs lawyers for advice and guidance where required. I am sure that they have been preparing a specific response to Pannick et al for however many months it has been clear what the challenge(s) to be brought are.

Is the case going to be heard before 20th December? Has that been reported?

To note, the letter before action hasn’t yet been issued

amp.theguardian.com/education/2024/oct/31/private-schools-to-take-legal-action-against-planned-vat-on-fees