The effect of VAT on private school fees.

[HeadDeskHeadDesk]

If this is brought in, and it seems likely it will be, I've been thinking a lot about how it's going to shape things in future.

Personally I think it's outrageous to introduce it from day 1 and it should only be introduced immediately for new pupils who are not already in (or signed up to be in) the private system.

Parents should have at least 1 academic year of notice that VAT will be levied on their fees, as their child moves up through each stage of their education, between infants, juniors, year 7 or sixth form. Or in the case of public schools it would be moving from Prep to common entrance.

You should be exempt from paying VAT until your child reaches the end of whatever stage they are at, as it's a natural break with the opportunity to move into the state system with less trauma and disruption to the child. At least that way, you'd have fair warning and plenty of time to make alternative arrangements. People with kids in private junior school will be pushing really hard to get them through the 11+ and hopefully into a super-selective state grammar school, but plenty already do that anyway and only keep their children in private school from year 7 onwards if they are unsuccessful at 11+.

The disruption to children will be terrible if they get pulled out mid-key stage or halfway through the two year GCSE programme, or whatever. Getting a state school place anywhere within sensible distance of home, let alone a good state school place is going to be hugely problematic.

Obviously it goes without saying that very good or outstanding state schools will already be heavily oversubscribed. I can see private school parents pushing up property prices around outstanding state schools (or decent Community Schools where they are obliged to take you at any stage so long as you live in catchment) even more than they already are, or renting out their main home and moving into catchment of those decent state schools in order to secure a place.

Either way, there is no doubt it's going to be carnage.

I'm thinking that as Home Education or Home Schooling is already a burgeoning thing, lots will go that way. But most people who were previously in the position of being able to pay school fees probably don't fit the typical profile of most home educators. The private school parents are most likely people running their own businesses or earning high salaries in professional or corporate jobs that require their full attention, so they are probably not in a position to undertake the home schooling themselves.

I see these parents potentially banding together to create Home Ed co-operatives where they sign their children up to online learning schemes, then collectively employ freelance teachers as private tutors, rent workspaces and meeting rooms etc.

So their 'home schooled' children now learn with with maybe 10 or 20 other children, five days a week, dipping in and out of different sessions according to age and subject and which teachers are available that session, to oversee and supplement the online learning.

It wouldn't take that much to organise and it would be far cheaper than private school if enough families grouped together to fund it.

The argument for private schools not paying VAT doesn't make sense. Of course they should, they're a business.

But of course, they're a business that benefits the rich so that's why they've been allowed.

I don’t know if some are “businesses” but a lot of private city day schools doing what they can, for fees as low as can be managed, are not profit making businesses but trusts where the fees are put into the school and onto bursaries.

Then there are the specialist private schools for children with special needs.

@CatamaranViper · Today 14:50
Sorry, that wasn’t meant for you.

@HeadDeskHeadDesk might be seen as an illegal school

Almost no country in the world taxes education services based on the recognition of the long term benefit education has a whole has to society.

Do you believe that university education should be taxed? There is actually more basis for taxing university education which is completely optional than the years of schooling which are mandatory.

If I send my child to a private school shouldn't I be able to claim back the amount £6-7k/year that I'm saving the government per child?

@ladykale some countries offer benefits like that

The argument for private schools not paying VAT doesn't make sense. Of course they should, they're a business.

I don’t think you’ve fully understood the situation. Private schools do pay VAT. They pay input VAT which they’re unable to reclaim (unlike state schools).

This proposed policy is about output VAT which parents will have to pay.

Around half of private schools are businesses and pay corporation tax as such.

The VAT position has nothing to do with being a “business”. Plenty of businesses don’t have to charge VAT because of exemptions in the VAT legislation (private hospitals, care homes, nurseries, bakeries etc). If you’re arguing that all businesses should have to charge VAT, the implications of that stretch far wider than private school fees.

I think in practice ( imagining myself) even that number could start to get tricky to deal with. It could be a bit like the reality of going to live in a commune!
But I am sure you may be right and people will try.

Will overseas pupils be exempt? Tax rebate at the airport desk.. "Err, here to declare my education"

I understand why people who are fundamentally opposed to private education think this is a good idea and I understand why people who are envious of those who can afford private education think it's a good idea.

I just wonder if any of them ever stop to think of how much tax payer money is being saved each year precisely because of people paying for private education. Rather than thinking of them getting something for nothing, (not having to pay tax on school fees) perhaps we should think a bit more about the ultimate cost to the state of nobody wanting to use private education at allin future. I think it's a case of 'be very careful what you wish for.'

Hundreds of thousands more middle and upper middle class children joining the state school system only takes more money out, it doesn't put a penny more in. And most importantly, it does absolutely sod all to improve the education standards, attainment levels and prospects of working class and disadvantaged children.

TBF they probably also think the rich should pay more tax as well.

Ah, thank you. If you are correct, this is the sort of thing which is never made clear. It is just the sound bite: “Private schools do not pay BAT [like everyone else]”.

Private schools do pay VAT. They pay input VAT which they’re unable to reclaim (unlike state schools).

This proposed policy is about output VAT which parents will have to pay.

Please would explain a bit more? What would ‘input’ vat cover? Is ‘output’ fees?

Exactly. If the state gives me the £8k of funding which state school pupils receive, I’ll happily pay VAT on private fees. Some countries do subsidise their private education systems (Finland, Sweden, New Zealand, Australia etc).

TLDR

Why not just add to the MANY threads already running?

I think France and Ireland as well?

You forgot the avocadoes silly!

I think that this is idealistic.

Inequality will remain - only it will be based on house prices, instead of school fees.

There is a gigantic amount of inequality in the state system already and the fixation on private schools is obscuring this.

The very best state schools are getting about 80 kids each into Oxbridge per year. Many, even those ranked "good" are getting 0 kids into Oxbridge.

Labour can crack on and tax the hell out of private schools, even abolish them. But it is a pipe dream to think that this achieves any kind of equality.

Well as this government (and any future Labour government as well I imagine) seems to have absolutely zero ability or appetite to stop anything illegal whatseover these days, from epidemic levels of shop lifting, to the availability of illegal drugs that are as easy to buy as a bag of chips, to children vaping, to a 50 million quid benefit fraud committed by foreign nationals, which I am quite sure represents the tip of a rather large iceberg, to out of control knife crime among young people, to boats full of men who are largely economic migrants landing on our shores, to stopping people who drive with no insurance, then I don't see why anyone thinks that would be an issue.

@ScrollingLeaves when you buy certain good they have VAT added on. If you are running a business and you purchase such an item that is treated as input tax. If that business sells goods which fall within scope for VAT they add VAT onto the selling price and that is Output VAT. Then they do a VAT return and if they have more output VAT than input they pay difference to HMRC and if they have more input VAT they can claim the difference back.

If you are not VAT registered you can’t claim input VAT back but you wouldn’t charge VAT on your supplies.

Under EU rules Education didn’t fall within the scope to charge VAT on fees, so were making exempt supplies. Labour wants to change this for private schools.

Most school costs are staff costs so no VAT on that, so in theory will have higher output VAT so will be paying over to HMRC.

However, if they have spent a large amount of costs on buildings in the last few years they might be able to claim some of the input VAT back on that expenditure which they hadn’t been able to do in the past.

I think it does need to be made clearer. Unfortunately the Labour Party and media often trot out headline grabbing lines such as “private schools pay no tax”. That is factually incorrect and extremely misleading.

Output VAT is tax charged on the sales of some goods and services. In this case, that would be the VAT on the fees which a school charges. This would be payable by parents.

Input VAT is tax added to the price of goods and services a business buys. For example, a school would generally have to pay VAT on stationery, musical instruments etc, energy costs etc.

When a business prepares its VAT returns and accounts for tax, they show the VAT they have charged customers, but can offset the VAT they have incurred themselves.

As the situation currently stands, private schools are exempt from having to charge VAT on fees. However, because they are not VAT registered, this means they cannot reclaim the input VAT they have incurred on things they’ve spent money on. This is different from state schools who can claim back that VAT. So, we have a situation where private schools are already paying VAT whereas their state counterparts aren’t.

There are also situations where private school parents are already penalised through the VAT system. For example, as a private school parent, if I wanted to buy a musical instrument costing £1,000, I have to pay £200 VAT on top of that. If my children attended state school, I could buy exactly the same instrument VAT free. To buy exactly the same thing costs me £1,200 as a private school parent, but if I moved my child to state, it would only cost £1,000.

These things are often overloooked. As a private school parent, I already save the state £8k a year per child. My fees also go towards VAT which private schools have to pay. I also have to pay more for instruments. I don’t mind that. That’s a choice our family made. However, I do object to then being subject to a further tax penalty by way of VAT on fees.

Yes, I believe there are quite a few examples. It’s also worth noting that EU countries are not allowed to charge VAT on education under EU law.

A race to the bottom then?

Tax has just been raised for older/larger vehicles.

Oh dear god these threads! It’s all there is on here these days! Is it some bombing thing by Tory HQ?

As someone on another thread said only 7% of pupils are in private schools yet every last one of those mums is on mumsnet!

Another thread on this, really??

if this is your main worry in life then you should count your blessings - that’s all I can say.