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

Actually Treasury calculations didn't include pre-payment of VAT. IFS report clearly stated that.

You may also be interested in these Treasury figures. They based the claim of 1.5B revenue was based on 0% leaving. They predicted 3K the first year, well 16K have left = 3%. So you can see the impact that has on revenue.
Government predicted 50K would leave in total, that's approx 10% and that's also the figure at which the policy brings in £0.
We are 3% in the first 6 months, at the current rate we will hit 10% by Dec 2026. After that it will start being a cost to taxpayer

*Dan Neidle not Dan Bridle. Autocorrect.

It’s certainly an interesting Freudian slip. I wonder who is the horse and who the rider.

🤣 well considering he is a paid up member of the Labour Party and an activist for them, I will leave that up to your imagination.......

they weren’t giving fee payers a good deal because they were VAT exempt

Whilst the whole post is poorly thought out, I really need to pull out this bat-shittery.

Could you explain your 'logic' please?

I'm hoping it's a parody otherwise the poster is just incredibly ignorant

Are there many schools that put their fees up by 10% each year for the last 10 years, though?

I’ve just looked at our fee invoice from 15/16 and the average annual increase since then works out at 4.5%.

Which doesn’t seem too bad to me.

There is no logic. What actually was the whole point of it?

Labour did not announce this policy in order to correct the naked profiteering of independent schools, they said they were introducing it in order to take money (nearly £2 billion!) from the wealthy parents who pay school fees, to plough into the deprived state sector. The money would pay for the recruitment of 6500 new teachers in the state sector.

Loads of people knew at the time that this was all lies and obfuscation, and a year down the line it just looks farcical and proves that this government hasn't got a clue what it's doing.

I can’t believe how rude people are on Mumsnet. Is your lack of vocabulary the result of an independent school education, or did you not pass the 11+ yourself?

Did you get this upset about the two-child benefit cap or the bedroom tax?

It is astonishing that fee payers don’t pay any scrutiny to their school’s finances. If parents had challenged Baines Cutler benchmarking their fees, they wouldn’t have reached the excessive levels that they have (and this is even before VAT was added).

But you won’t look into that will you? You’ll just swear and rail a bit more at the government’s attempt to draw revenue to support public services.

My point about previous years where VAT was not charged to parents is that this did not prevent schools aggressively raising their fees. And if VAT wasn’t being charged, they would still be putting your fees up, wouldn’t they? In fact, some schools have passed on the full 20% to the fee payer, which will certainly mean that they are using the policy to make a profit. That’s where your scrutiny should be directed, along with the profligacy and waste that has for some time been characteristic of the sector.

Your lack of awareness of school finances is outstanding.
Legally schools have to pass on the 20%, what SOME may be able to do is offset fees however most schools run on a tiny surplus ie 1 terms worth.

FYI it is a quadruple whammy: VAT = falling roles ie income Vs increasing outgoings due to : NI, NMW + business rates increass. That's simply not sustainable.

Labour started off by saying " no schools will close as a result" now we are on over 50 closures for this year they say "schools have mismanaged finances". It's all bollocks!

We warned that most schools would have to pass on full 20%. Government knew that too. They are mendacious liars

So basically you support taxing the education of children.
Even though no other country in the world does that (without also giving generous tax incentives to use independent schools).

Stop blaming the schools and stop gaslighting people who know the full story!

I appreciate that schools closing is very upsetting for families and children, but this stuff happens in the state sector as well. My own (state) school closed down when I was 13 owing to demographic changes, and we were redistributed via an amalgamation.

It was very sad because me and all my classmates loved the old school and were thriving on the unusually small class sizes, but it wasn’t a life-changing unmitigated disaster. I mean, I really loved that school: it was family-sized and it had the very, very best school cook in the history of school cooks. I hated the new school, it was big, unfamiliar .. the food was absolutely shit.

It just isn’t logical to try and explain every closure by citing business rates and VAT changes.

Some of these schools had been struggling for years with low enrolment numbers and non-viable financial structures, normally because of local demographics, lower than market rate school fees (presumably to attract customers), and high and rising premises and staff costs. That’s the market. Market forces aren’t kind.

Anyone who has worked in an unpopular state school will recognise this. There’s very little backing for state funded schools which aren’t financially viable either - those with poor enrolment numbers, high site costs, undesirable to parents because of poor inspection/ results, etc, will also be prone to closure. You might get a couple of years of grace via falling rolls funding if future population projections suggest demand for places might rally, but on the whole not. If not enough bums on seats it’s amalgamation or outright closure:

“My point about previous years where VAT was not charged to parents is that this did not prevent schools aggressively raising their fees. And if VAT wasn’t being charged, they would still be putting your fees up, wouldn’t they? In fact, some schools have passed on the full 20% to the fee payer, which will certainly mean that they are using the policy to make a profit.”

I am unclear as to how school fees not previously being subject to VAT has any bearing on school fee increases in prior years. I am also unclear as to how schools are profiting from VAT on fees.

Previously, school fees were not subject to VAT, therefore schools did not add VAT onto their fees. They had annual fee increases of varying amounts. Many businesses have annual price increases; schools are not unusual in this respect.

Now they are required to charge VAT on their fees. The VAT is merely collected by the school and is paid straight over to HMRC, the schools do not keep any of it.

As an example, let’s say a school’s fees were £20k pa. Leaving aside any annual fee increase, they would now be £20k + VAT ie £24k. However, this does not mean that the school “has put their fees up”. They have kept their fees the same, and VAT has been added on top. The school still only keeps the £20k, and the £4k VAT is paid to HMRC.

Some schools have chosen not to pass on the full impact of VAT. The only way they can do this is to reduce their fees. In the example above, if they only wanted to increase the total paid by parents from £20k to, say £22k, this would mean them reducing their fees from £20k to £18,333. It depends on an individual school’s finances whether they are able to do so.

i am unclear as to how schools “passing on the full 20%” means they are profiting. Yes, they will be able to reclaim VAT on purchases, which will reduce their operating cost base slightly. But given that wages, NI, pensions, and books, are not subject to VAT, it is a small proportion of their overall day-today operating costs that they will be able to reclaim VAT on. Plus business rates charitable relief has been removed at the same time, which for some schools will mean they are not seeing much of a reduction in costs at all.

Some schools may have had capital spend in recent years that will mean a one-off reclaim is possible. Some schools might use this to limit the overall increase in the amounts paid by parents for a couple of years; some might use it to bolster their bursary funds; some might see it as a chance to strengthen their balance sheet.

I agree that schools passing on the full 20% are not profiting, unless they are offsetting input vat on their accounts. In which case, charging 20% extra is indeed profiting.

Schools that genuinely pass on only their extra costs are in the clear.I’d imagine most on narrow margins and with an eye to both recruitment and retention won’t pass on 20% unless that reflects true costs:

I do personally know of one school (via a friend who has a child there) that has just said, fees are going up by 20%, if you can’t pay, never mind, we have a waiting list. Hopefully it is an exception.

And now The Times is reporting on the subject of HMRC clawback for FIA schemes:

“HMRC could claw back millions in VAT from advance school fees”

www.thetimes.com/article/674aa01b-c39c-4f83-b76f-3c4032b73b2f?shareToken=ecbeb9aa1a9ba998cfde09999ce58f6f

I can't believe how rude people on mumsnet are to tell people that they're glad they're having money stolen from them by a malicious, ideological government and that they support an economically-illiterate policy whose only purpose is to destroy our schools and take our children down a peg or two. The schools we pay for entirely ourselves - after paying tax - as well as paying more than our fair share for your schools. And then you're surprised that I'm pissed off? Un-fucking-believable.

I also can't believe the utter lack of logic which tries to link exemption from VAT with previous fee rises. There's no link. You're just tying together soundbites.

As for the vocab comment, presumably it's batshittery you're objecting to? We can expand it to fuckwittery and dickwaddery if you like.

They'll waste yet more money - undoubtedly costing more than they get - just to deliberately and maliciously hurt the demographic who subsidise the rest of the population.

How do they sleep at night? Fuckers.

Parents can still give notice and withdraw their kids. In which case, the fee prepayments would need to be returned? So nobody who does not want to needs to pay this ideological Labour VAT. Perhaps if HMRC go for the schemes the schools will just return the money to parents anyway? Voluntarily? Anyone bothering to think ahead? I guess not, as usual.

I don't think what school you went to affects how people treat you once you get to uni. I've done some limited job application reviews and I'm totally uninterested in the school bit - degree type, class & place of study are relevant - I've never been asked to produce proof of my school qualifications for any job, but I have needed to produce uni & professional qualifications certificates & I've seen applications where those are checked. Depending on where you move to people may be unable to tell from the school name if it was private or state anyway.

Predictability there are now calls for VAT on private healthcare, yet again. Which will lead to many not paying up anymore and using NHS instead, and some people doing health tourism in other countries and the NHS picking up the pieces eventually anyway. And the private and NHS healthcare work well here, together, supporting each other. Yet some people want to compromise that partnership. Nobody thinks around the consequences of whether a tax grab is ultimately worth the fall out.

Rather than penny pinching on the sides, the urgent issue of structuring the sovereign debt differently - still no solutions.

There were a lot of articles last year about what type of scheme would give a VAT date at the time of the payment and which type would have a VAT date each term. I can't imagine many parents prepaid into deposit type schemes (where they just pay a lump sum and it's drawn down for variable fees until it's gone) thinking it would shelter them from VAT. So it's unlikely that the government will get much if they do go after schemes: but I'm sure they'll waste lots of money before they figure that out.

Agreed. It's people with a chip on their shoulder that believe that the purpose of private school is those mythical connections. It's much simpler: it's for a great education. Education in the true sense: the personal development and learning which makes someone the best version of themselves. Not just grades.

Shame on Labour for deliberately trying to make children less educated.

@strawberrybubblegum - I am going to assume that a school like Brighton College would have sought detailed tax and legal advice before accepting 50 million pounds from their own parent group. And that the scheme would have been drafted accordingly. Surely Dan Neidle would know his own former type colleagues will have been on the case, potentially, knowing full well that many even may be parents at that type of school.

Dan Niedle is hardly unbiased though in any case

I think this is sheer desperation on the part of the government because they have ballsed this up soooo badly. If it's a proper long-standing prepayment scheme they won't stand a chance and will just become embroiled in costly legal action. A 'government spokesman' in the Telegraph is still parroting the rubric from last year when the policy was announced (6,500 new teachers blah blah blah) even though every now knows there are no plans to ring fence the money for education.

Eton said last year that they hadn't yet decided whether or not to reclaim the VAT on building works - I hope they claim every single penny of what they are due!