Whitehall “braced for private schools collapse” 7

[ICouldBeVioletSky]

Continuation of previous threads discussing VAT on independent school fees. The thread title is a headline from a Times article last autumn.

https://www.mumsnet.com/talk/education/5237575-whitehall-braced-for-private-schools-collapse
https://www.mumsnet.com/talk/education/5242586-whitehall-braced-for-private-schools-collapse-2
https://www.mumsnet.com/talk/education/5280646-whitehall-braced-for-private-schools-collapse-3
https://www.mumsnet.com/talk/education/5301690-whitehall-braced-for-private-schools-collapse-4
https://www.mumsnet.com/talk/education/5317397-whitehall-braced-for-private-schools-collapse-5
https://www.mumsnet.com/talk/education/5337850-whitehall-braced-for-private-schools-collapse-6

HMRC confirmed that there's no way they can backdate or claw back VAT prior to end July

Ok - that doesn't seem to be quite the tone of the Telegraph article, which implies HMRC may try to make some claims.

https://www.telegraph.co.uk/news/2025/08/04/parents-pay-500m-to-beat-private-school-vat-raid/

Well there's a statement somewhere from HMRC stating they couldn't. I will try to find it.

Dan Niedle clearly states that HMRC can't go after pre-payment schemes if they were proper pre-payment schemes and that supports HMRC prior statement.

“Ok - that doesn't seem to be quite the tone of the Telegraph article, which implies HMRC may try to make some claims.”

And what exactly will be the implications on foreign direct investment of HMRC challenging this kind of tax and us becoming known as a nation of backtaxers? And all for a pittance in the greater scheme of things?
It really won’t be worth the reputational damage given where we are on the currency and gilts etc.
HMRC chasing middle class parents who remortgaged to keep their kids in school rather than real fraudsters/black market economy etc. Bad look all around, as well as potentially dangerous for all of us. People are already spooked with these non dom inheritance tax reaches, the autumn budget, there is capital flight supposedly - why would that be worth doing?
The law stated the date very clearly in July.

I don't know about foreign direct investment, @Araminta1003 - I was just interested in whether the PP had had any issues, as she/he is the only poster I am aware of who has used a scheme like that ahead of July 2024.

We prepaid before 29 July (or whenever the cutoff date was) so we should be fine. Also, our FIA invoice stated very clearly the dates and terms to which it relates - it wasn’t just a random sum of money paid to the school for non-specific things, which is what HMRC could potentially have an issue with.

Al our termly invoices since then have essentially detailed the terms fees and said there is a zero balance to pay.

I think that probably all schools will be assuming that any FIA made before 29 July are OK and will be assuming no VAT due, unless/until HMRC investigate and tell them otherwise. Which I think is increasingly unlikely.

Well at least you now know that PP isn't the only person to have used it.
As predicted.

Um, ok - I never said that the PP was the only person - just the only person who has posted about it on MN.

Honestly, ask a simple question!!

Thank you! Really appreciate the answer.

Because most posters probably wouldn't say it as they would be piled on.

I have the answer now from the PP to whom I actually directed the question.

I am not quite sure why you are being so bolshie with me, but have a great afternoon anyway.

The article said that the money might be taxable if it could be proved it was a deposit (ie refundable) rather than a prepayment. It went on to assert that they had no hope of proving this, especially for the big name schools, who have been running these schemes for years, but that it might possibly affect yet more of the smaller schools who have only set up schemes more recently.

Not being bolshy at all, that's your interpretation.

In theory HMRC could claw back VAT on fees where they don’t feel that the scheme meets the conditions necessary. Very basically the conditions are that the amount prepaid has to be for specific services eg term dates listed out, rather than being a general payment to the school, and that the school has to be able to access the monies with no restrictions on when and how they spend it.

Pre-existing schemes are probably more likely to comply; ones set up in a hurry may or may not. It is worth nothing that the Telegraph reports states the £500m only applies to the “top 50” schools. It would be interesting to see what the actual total amount is!

With regard to these schemes only being available to wealthy people, I do take that point, however as I said, if we hadn’t had the money available we might have taken out a bank loan or extended our mortgage to make the payment. Again I realise this is by no means an option open to everyone. But although, yes of course a large chunk of the advance payments will be by the super-rich, there will also be more “normal” families like us who were able to do so.

oh, I took too long writing and x posted with tonton!

FWIW we prepaid DC final year (11) prior to last July, in anticipation of the government bringing in VAT. Their school already had a longstanding pre-payment scheme; I doubt it is a "top 50" school as it's a fairly ordinary sort of independent school, in the north of England. DC will be going on to state sixth form.

And obviously the larger (richer) schools will benefit more from FIA than the smaller ones, so it’s just another example, alongside reclaiming VAT on some historic capital spends, that means the gap between the bigger richer schools and the small schools continues to grow. Which I’m sure is exactly what Labour intended: help out the likes of Eton, and help put out of business the small local indie

🎯

https://www.dailymail.co.uk/news/article-14972691/Labours-tax-raid-private-schools-swerved-parents.html

According to this 819 prepaid at Brighton College?

So how many pupils does Brighton College have? Like 1200? And more than half prepaid? Maybe many were smart and just prepaid for the 24/25 academic year and the school, being smart, encouraged them to do so, for at least one year.
I remember this time last year. There were rumours before the election that the VAT on school fees would not come in until the 25/26 academic year. And then when Labour got in they ambushed parents with a January 25 start. Probably to trick them and raise some money. And there were Labour members warning people not to prepay.
If it is 515 million just for the top 50 schools, the real figure for 2600 schools must be huge.
When are they going to admit this is loss making and a shambles? Never is not good enough. They have to answer to the taxpayer!

I support Labour on this.

Private schools have been aggressively raising their fees and out pricing families for over a decade In an arms race of facilities and ludicrous rises in headteacher salaries.

And all the time they had relief from business rates and weren’t charging VAT - they weren’t giving fee payers a good deal because they were VAT exempt, and parents entirely gave them a free pass on this.

It’s a shame that mismanagement of the independent sector has caused so many schools to close, but this policy was not the start of that.

Have a look at Baines Cutler and try to figure out when it was you started to be ripped off, and perhaps challenge that?

This is a parody post yes?

In hindsight, improving facilities pre 2020 was absolutely the right thing to do, when labour and supply costs were cheaper. Just a shame the same foresight was not applied to hospitals and state schools! These old buildings and facilities are costly and these facilities should be shared as widely as possible in the community. In many areas they are the only concert halls, playing fields etc etc to speak of. Why would anyone want to destroy that for children and their education rather than working on more wider use for many? Makes zero sense.

This is a simple divide and conquer and alienate strategy that is not going to benefit anyone, least of all our children, as a whole. It was put forward to gain votes, stick it to the rich supposedly (which won’t work) and placate the hard left (which has also failed miserably). It is complete bullshit from top to bottom.

The figures work out that 819 years were prepaid at Brighton College, not 819 pupils. So eg. any one pupil could be responsible for up to 15 years of prepayment (or however long their maximum period for prepayment is). There's a Guardian article on it (featuring Dan Bridle) which pretty much backs up what RockaLock says on HMRC. And also the 5-6% reduction in VAT revenue via pre-payment, which will decrease year-on-year, has anyway been factored into projections of takings from the tax. www.theguardian.com/education/2025/aug/05/hmrc-could-reclaim-money-vat-avoidance-schemes-private-school-fees

If your suggestion is that the brilliant financial minds in the management teams of middling private schools had the foresight to up their fees by 10% every year during a decade of near zero inflation in order to afford capital projects when the prices for them were better, then surely - having completed these projects - they could reduce the fees back to 2010-equivalent levels now that such expenditure is no longer required. Are they not doing that? Oh.