VAT on private school fees - ITS NOT ACTUALLY LAW THOUGH?

[BellesAndGraces]

Why is nobody reporting on the fact that the Finance Bill has still not been to the House of Lords or even been debated yet? All the reporting, eg in The Times, just says that VAT will be payable on school fees from 1st Jan but misses out the fact that this is not yet law - surely this is a key piece of information. Am I missing something??

Also the 10% figure appears to be plucked out of thin air and doesn’t take into account the other significant cost pressures; increased Employer NI, increased TPS contributions and the ending of business rates relief.

@PoorPhaedra once it's a VAT rated service, then VAT must be charged.

So if fees pre-VAT were £10,000, they become £10,000 + £2,000 VAT when VAT comes into force.

For the school to keep the cost to the parents at £10k they would need to reduce the fee to £8,333.33 + £1,666.67 VAT.

The school would pay the VAT collected to HMRC quarterly, less any VAT they paid out on supplies and services.

Have you missed the stories about dozens of Steinways and Golf Simulators? Have a look at the profits for some of these schools. Cutting staff is absolutely not "the only way they can reduce costs" at most schools and in the instances where they are, then welcome to a small fraction of the problems the state sector has been suffering for 15 years.

How many schools do you know with dozens of Steinways and golf simulators?! Many schools (particularly preps) are in buildings that are little more than large houses. I’ve been an independent school parent for over 11 years. I’ve looked at a lot of schools at open days and visited many more for sports fixtures. My DC’s school has pretty decent facilities as it’s a large all through school but the sports hall at my DC’s state grammar is far superior and the swimming pool and changing rooms are far nicer at my catchment comp.

At one memorable sports fixture where the oppositions rugby pitch was a community playing field a few miles from the school, there wasn’t even a changing room or toilet. Us parents were advised to use the pub round the corner. The boys pissed under the trees.

Also, pianos and sports equipment may be supported by the pts, paid for by a directed donation or be on some kind of lease finance. Salaries are the largest proportion of running costs. They really are

(private school parent, thinks vat policy is fair enough)

It makes you wonder why some parents choose to pay to inflict such deprivations on their offspring.

Paying taxes is financial abuse?! Jesus, I heard it all now.

Small, quiet, calm schools. As someone who suffered sensory overload and severe anxiety during my time at a large comp which resulted in a suicide attempt, those small schools are worth their weight in gold.

The policy is popular. And all these pushy parents will make the state sector a better place.

I don’t know where you get this idea from. Both mine went/ go to a private school and I don’t even know who my DCs form tutor or head of year is. The last time I wrote to my DCs school was about 3 years ago. I don’t need to as my DC are self starters and disciplined to get on with it on their own. I was on the PTA a few years ago, but I won’t be doing it again when my DC moves to state 6th form later this year.

I don’t plan on contacting them unless there’s a massive issue, so I won’t be being “pushy” for my own DC, let alone for anyone else’s benefit.

If my DC needs it, I’ll organise a tutor for them. Again, nothing to do with the school, and my pushy parenting will be outside of the school.

Here’s a great idea. How about you get “pushy” with your own state school on behalf of your DC, to improve it, rather than expecting us to do it for you.

Already only 50% of the top 1% earners send their children to private school. Why do you think they won't change their economic choices to suit their own preferences, just the same as anyone else does?

But the financial impact on the UK of them changing their behaviour is 30x higher than what what you would expect from the numbers.

Then the top 2-10% of earners, who earn between £72k and £182k. Those earners pay in another 30% of the UK's income tax... and create a similarly disproportionate amount of UK's productivity and GDP.

The financial impact on that tranche of earners changing their behaviour is 3x higher than you would expect from the numbers.

I'm sure it's uncomfortable to you to recognise that actually, they matter. But that's what happens when only 50% of the UK are net contributors and almost all the money used to pay for the NHS, state schools, welfare, pensions etc is squeezed out of a small number of high earners. Their economic choices do actually make a disproportionate difference to everyone. Between 3x and 30x disproportionate.

So putting them off working - and staying in the UK - is self-sabotage by the government.

The Nordic model - which takes similar tax from high earners as the UK but twice as much tax from low earners - and pays welfare out according to how much the recipient has previously put in - is much more socially cohesive.

Everyone weighs up the options they personally have, and makes the choices that works best for themselves and their family.

Rich people have more options. They can choose expensive things like paying for a great education for their children themselves instead of using the state offering. They can also choose to work less. They often have in-demand skills which mean they can work elsewhere.

But their motivations are no different from anyone else's.

Every single time there is a change that affects the highest earners, there is a lot of fear mongering that we (yes, I am one of them!) will all leave but it never actually happens.

I'll believe it when I see it.
E.g. after the non dom changes.

warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/wp630.2022.pdf

Obviously, somone on NMW also has the choice to work less: and many take up that option and become SAHM or work part time.

But someone working full time on NMW (approx £20k) only contributes £2k to the UK in tax.

Someone earning £100k contributes £31k to the UK in tax.

The higher earner choosing to become a SAHM has 15x the impact on the UK economy as the NMW earner making the same choice.

Some will leave.

More will choose not to privately educate their children and the high earning Mum will stay part time.

Difference in income tax and NI paid by a full time £100k earner versus 3 days a week is £17k.

That's equivalent in tax take to 8 full-time NMW earners stopping work entirely.

Yeah yeah, heard it all before. Will believe when I see it.

OK

This article might interest you, about how France's wealth tax between 2000-2014 is estimated to have caused 42,000 millionaires to leave France, reducing tax income by €7bn a year and reduced GDP growth by an estimated 0.2 per cent a year.

They repealed it. Unfortunately, they have found that the economic damage was irreversible, and the tax take hasn't gone back up. I guess people didn't trust them not to do it again... and sure enough, they're planning to.

I suppose it's a silver lining that these taxes give good data about fiscal impact. Pity governments don't seem to learn from them.

https://www.investorschronicle.co.uk/education/2021/02/11/lessons-from-history-france-s-wealth-tax-did-more-harm-than-good/

That was a much bigger tax change than this.

This is more comparable to the non dom changes which didn't have any discernable impact. You might find the article I linked to of interest

Why would the Tory press do that? They understand parliamentary procedure as well as you do.

Much, not all, of the right wing press is of a better standard than the left wing press: it’s more successful and better resourced.

More generally I do think many of the private school parents on MN are fooling themselves if they think lots of people care about this policy. And the persistence of the anti-VAT threads is tiresome.

If this policy affected me - it doesn’t - I’d just wait for judgment in the judicial review. There’s a reasonable chance that the court will declare it unlawful under the Convention.

It’s not a wealth tax though - it a removal of an exemption for VAT. It only affects the value of school fees which is capped and will amount to a £3k-10k per child per year during schooling.

It is not the kind of tax that sends billionaires off to Monaco.

I am sure it is depressing for the people that have to pay it. But they are a small group who already have good disposable income and have had years of warning that this was on the cards.

As I said earlier, I do understand that if it affects you, it seems like a big deal but some people have just totally lost perspective.

It makes you wonder how they hold down jobs that pay enough for private schools to be honest.

I am broadly in favour of policies that aim to have more children in state schools because I think that in the long term it will lead to better state education.

But I think the only way to achieve that is to improve state education so that more people choose it.

I know that needs more money, but I think it is fairer to raise it by income tax.

And the reason I think that is because improving schools takes time.

Where I live there are two state schools in the town. One is 'outstanding' and the other 'requires improvement'.

There are a few private options and they vary on price/single sex/religion/level of difficulty to get in.

I know 5 families who have chosen to send their children to state school in the coming year 7, when they received an offer from one of the private schools and previously would have sent the child there.

All 5 are going to the outstanding school, by virtue of where they live. It is obviously vastly oversubscribed. The requires improvement school is undersubscribed.

So the immediate result of this policy is that 5 (other) children who would previously have gone to an outstanding school are now going to a school that requires improvement. And however much money is raised by this policy I don't think it will turn that particular school around in under 3 years.

I know these are the decisions governments have to take, but even if in the long run it will end up better for state education as a whole, I can't help feeling there are quite a few state educated children who will be adversely affected by this policy, which need not have been the case if different tax raising decisions had been made.

It's the sheer stupidity of it that draws me like an itch @kiraric . I am an eternal optimist, who believes that information must help - although I really should know better by now. And I enjoy writing.

But perhaps I should move onto the other stupid things Labour are/aren't doing. For sure, some are more significant.

Thanks for the Non Dom article. It's not an area I know much about.

None of the things Labour are doing will have as much negative economic impact as Brexit.