Private School VAT solution?

[HappyCompromise]

I’m seeing a lot of these threads. The arguments getting very toxic.

An idea I had to make it fairer would be introduce the VAT on a rolling basis.

So from whichever date it’s Y7 which has to pay +VAT. The school is allowed to reclaim a 1/7th VAT spend (or whatever that is as a proportion of year groups they service).

Y2 - Years 7 & 8 are now paying. Schools reclaim 2/7ths of their VAT spend?
etc. etc.

So at least the current cohorts can finish their education unhindered.

Would both sides be happy with that?

The problem is - the point of the policy isn’t to raise money, it’s to send a message that Labour are against “the rich” and for the workers, so anything to make it easier for the “rich” won’t fly with their supporters.
It’s just a start to the increase on taxes to the middle and upper earners. The green policies will affect way more people and cost a LOT more than this. I wouldn’t want to be a landlord under a Labour government.
Unfortunately I do run a business in the U.K. and we have already decided that as a result of the proposed policies we won’t be hiring any more U.K. based staff, but anyone we need will be outsourced overseas.

Interesting, I hadn’t looked at the employment policies.

but you’re right, it’s not about fairness or anything else, it’s about “soaking the rich” or being seen to be heading in that direction.

its been tried in the past, taxes at the current rate are regressive. Maggie found out that if you reduced taxes then the tax take rose quite substantially.

were some way off re learning those lessons and the only way out is through unfortunately

Why can’t schools absorb some of these costs? As you say, they will be receiving a 20% rebate on some of the costs they incur as a result of charging VAT. Many of the private schools I know also have significant assets beyond the school gates (property etc). There has been ample time to plan for this heavily signalled policy.

On what basis do you believe private schools should have charitable status? Why should they continue to benefit from this tax loophole?

It is not a case of the Labour Party hating the rich.. The truth is the less affluent members of society have been paying the price for right wing ideology for 14 years - first via austerity, and more recently thanks to Liz Truss’s madness. None of it grounded in economic wisdom, all of it apparently stemming from some kind of class war. (Which also makes me think the private education system that produces these ideas leaves a lot to be desired anyway.)

They have almost no vat to offset.

It’s likely to be almost a 20% uplift straight to the bottom line.

Yabu only because I don’t think the policy will work as it’s not going to raise any additional funds for the government but instead will end up costing the government money as more people quit private / don’t start at private and start at state school instead.

There is a reason many governments in the world including Europe and Australia dont charge tax on education. It helps divert resources to the private sector which end up costing the government less. It’s like if more
people had private health insurance in this country then they will use the private sector more which alleviates pressure from the NHS. my DH’s company has private health and we have used it on many occasions eg getting private allergy tests done which drops us out of the NHS waiting list.

They shouldn’t mess around with education - I agree state education need more funding but it should come from another source and not trying to transfer money within one education bucket to another. The overall education funding bucket size (state and private) should be increased

There is a reason many governments in the world including Europe and Australia dont charge tax on education

Victoria will be imposing a payroll tax on non-government schools from July this year.

Private schools are bankrolled by the federal government than eye-watering degree: $17.8 billion this year, more than half the budget that goes to schools.

The overall education funding bucket size (state and private) should be increased

Private schools should be private, rather in the same way a personal car is private.

Not true, plus they can initially offset vat from any building etc work in the last 10 years.

Interesting can I ask why you're only hiring overseas?

Nah, just get on with it. All that will happen is children will go later or leave earlier.

I dont have strong opinions about the existence of private schools ( some of my friends are vehement in their arguments against them)
But i do struggle to accept that it isnt a luxury, that should be taxed.
State schools exist, if you pay for a school with better facilities and opportunities than most people can afford, isnt that a privilege that should be taxed like any other purchase?

It's an odd one because it's sort-of a luxury, but sort-of a socially beneficial necessity (education).

It feels a bit like private healthcare, or going to a fancier nursing home when a cheaper one is available. That's also a luxury in a sense, chosen by the richer, but health and nursing care js also socially beneficial, and if some people want to avoid burdening the NHS that's a good thing.

But I disagree with VAT on private schools mainly because it makes the schools even more economically exclusive. As economic exclusivity is the main purported harm of private schools, that seems weird.

If you want to raise money from the rich to improve education, better just to raise income tax, which doesn't have that effect.

If you wanted to avoid exclusive education then abolish private schooling, or make it state-subsidised and state controlled. (I'd oppose abolition for liberty and pragmatic reason, but it would be a more logically coherent response to worries about exclusivity).

Genuine question: if private education is a luxury and should be taxable? Should theatre/arts/culture charities also be taxed? In both scenarios they’re not for profits. Money is ploughed back into more education or more theatre/arts/culture programs. Both support the disadvantaged. In schools this is education via bursaries, outreach, work with other charities such as Royal Springboard. In the arts it’s also education, outreach and work with other charities. Where are lines drawn?

Didn't they cut the rate of VAT on theatre and concert tickets after Covid?

I don't think luxury is an appropriate word for private schooling because the outcome (qualification) is the same. It's just a better way of getting there, which is a choice one should have in a market.

Should we start levying extra charges on the better state schools which happen to be located in expensive areas? Why not? Poor people can't afford to get their kids in there either.

This is really interesting about the offset from building work. My school has had a massive building cost over the last few years so will actually make an enormous amount from this!

@Threewordseightletters I was thinking about VAT exempt arts companies with charitable status. I suppose I wonder where the line luxury is drawn. Is some theatre a luxury and some not? Same with education? Is it the monetary value we assign to something?

Why should it be phased in? I am against the vat on fees altogether personally but I don't see why those ready attended should receive benefit that future kids won't get? On what basis? They've already started by virtue of being born earlier?
This vat thing isn't about fairness it's about equity

The arguments for and against the policy / private education generally have been done to death but as one of the people who absolutely scrapes the barrell and is in debt to keep her kids in private due to inadequate state provision, I would support the oPs approach or something like it so that those already in, midway through exam courses etc are not faced with disruption. Most on MN seem to refuse to believe that a fair whack of private parents can't "just" pay the extra or that all schools aren't Eton. A gradual introduction at natural entry points would be a more humane and manageable approach for parents and schools in all sectors. But, as a pp said, this isn't about raising funds, it's about a headline / vote grabbing idea. If raising funds were the object it would a much "bigger" idea to raise tens of billions to overhaul the state sector so parents like me wouldn't have to use private to safeguard our children. It's not ok that I can (just about) and my friend who's DD is suffering can't parachute out. There should be no need but no-one is talking about that because none of the parties have a clue how to do anything meaningful to change it.

The argument is that this way, children already at the school aren't disadvantaged by having to move schools mid way through which can be very disruptive, and more of a problem than just not going to the private school in the first place. I'm not saying I agree, but that's the argument.

I think your idea would be fair and reasonable OP. The only thing I wonder is how easy it’d be to administer. Or the vat starts at 5% for all, goes to 10% in a couple of years etc. another option would be to charge vat for all from 5 years time so all have the option to get through their school years (I’m guessing they won’t do that as it’ll be beyond the next general election by the point it’d be due to come in).

I also think SEN schools should be exempt and allowed to keep charity status (well, I actually think the government should provide more and better SEN schools but that’s another discussion!).

@CoatRack that's basically the exact definition of a luxury. Clothes are a necessity, for example, but designer clothes are a luxury. Education is a necessity; private education is a luxury.

But it is about fairness @Brumhilda . Why should any section of society get a VAT reduction on goods or services just because they're financially better off than other sections of society? You don't get a VAT reduction on a new sofa just because you can afford to buy a better sofa than the Joneses down the road.

Nice idea, but VAT really doesn’t work like that!

er, no. That’s just another way of having the wealthiest dodge tax and the tax breaks or dodging for the wealthiest is really the part that most people are tired of.