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?

They aren’t leaving their schools for the most part! Parents will pay the extra money just as they have been paying 5/6/7/8% +’ for years now as their schools -
Many of whom are ‘charities’ -
gauge them year after year
But it will mean less kids starting private schools in the first place.

This is an ‘issue’ that affects a tiny minority of people. Though you wouldn’t think that from MN!

But you are many BU because their is no ‘Vat problem’ that needs solving!

So I haven’t seen the full details, but as I understand it, Labour will bring in full workers rights from day one of employment - at the moment eg there is a 2 year waiting period for unfair dismissal claims.

In our business we go through busier and quieter times and often hire people on a contract basis to fill a busy time. To protect the business we then need the ability to reduce staff costs when times are quieter, or to reduce hours etc.

The risk is, if that person can then say they have been unfairly dismissed, we would be hundreds of pounds out of pocket. Even just defending claims can cost thousands. We are defending a claim at the moment which we have offered to settle but the ex employee refuses to settle and we are spending thousands having to defend a claim that we have no desire to. There are no costs penalties in the employment tribunal so the claimant has no incentive to settle.

At the moment there is a fair balance between employee and employer (especially for smaller businesses) but Labour’s proposal puts all the power in the employee’s hands.

The roles that we tend to hire for are data entry and we normally hire mums, they can work from home around school hours. However, we just can’t take the risk of claims so we’ve found a company in the Phillippines that will do what we need and it’s flexible. We’re hoping that Labour water down their proposals but if they don’t, that’s what we’ll have to do.

Can you contract people on short term contracts? Surely you are not giving them substantive / permanent contracts for seasonal work?

I don’t disagree that employers need freedom and flexibility, and having worked in the public sector I have unpopular opinion that it can breed a culture of employees not pulling their weight. But I think the employer/ employee relationship has been eroded in this country as wages have stagnated and cost of living has risen. We have a low wage economy which makes it very hard for many people to get by. This means they have to treat their employer as an advocate not a partner.

If you are outsourcing to the Philippines I am assuming you are paying people minimum wage, which is no doubt going to be the sharp end of the problem

So I’m not sure yet what the rules are going to be on contracts, we’ll have to see the full policies before we make any decisions.
We pay around £15 per hour for these data entry roles which is quite reasonable (it’s the north east) as they can work from home, work flexible hours etc.

In reality we often keep people on through quieter times, maybe offering a reduction in hours but we need to have the flexibility to protect the business as a whole.

Also, we have our core staff on full permanent employment - we’re a really good employer actually, we offer flexible working, pay bonuses, give hampers and a Christmas bonus, they get extra holiday for every year worked etc. But basically we need the flexibility that if times get tough, we can actually make those hard decisions.

Interestingly, not all arts and cultural institutions’ activity is tax free. Making art can be understood as a charitable good for the charities commission, but ticket income and merchandise etc is not (this depends a little on scale, but the general rule is true). You can however claim theatre tax relief on some touring ticket incone if you meet certain criteria around accessibility and affordability.

To receive govt subsidy arts organisations have to meet govt requirements, currently associated with accessibility. This is why, for example, the English National Opera was forced to move to Manchester from London. Other large funders impose their own requirements, which will be associated with their own charitable aims. Donated income of course is unrestricted and can be used on anything, so that tends to be ploughed into things like artistic research.

This is why many cultural institutions have a ticket price with a donation fee listed separately - so they can claim tax relief on the donation. Most of them also have a separate, private business that runs the shop/ cafe etc. and either pays rent to the cultural org or donates part of their profit to it.

@Ozgirl75 that seems fIr enough. I think there needs to be a resetting of the employer/ employee relationship but I am not sure this policy is it. I hope things work out for you.

Labour also has plans to support freelance working rights in the arts (which is my sector). I fully support this in principle but it needs to be in the service of freedom and flexibility for everyone, otherwise it will just be a disincentive to do anything new or experimental.

It is true, major costs are property and wage related none of which are vatable unless the properties are held under an FR&I lease and is open in to vat by its owner.

any one off deduction, even if it is building works is just a one off and won’t make much difference long term.

though the prospect of the government having to make huge vat rebates because a lot of building work has been done is quite funny.

I've spoken to two private school bursars and they both reckoned they'd need to pass on about half of the 20%. I assume they know what they're talking about....

That’s the thing isn’t it? It always comes down to money and Labour have such form for not seeing unintended consequences of policies that involve employers. It’s like they can only see things from the side of the employee and think that businesses have an endless pot of money. There are so many small businesses in the U.K. (and ours isn’t that small - we have a turnover of over £1.5m and have 9 permanent staff) who have pretty tight margins and will just choose never to take risks, innovate or hire if there are a load of extra costs potentially involved.

And at the end of the day with clothes you have a different item in your hands. Not true for education.

Semantics aside, it's still a stupid argument. Just because something isn't the bottom of the barrel doesn't mean that the government deserves a fifth of the cost.

Food is a necessity. Why aren't we taxing all food that isn't rice and beans as a luxury?

Arts companies are not VAT exempt unless they are below the VAT threshold (which many are as they are small and there is little money being made). Being a charity doesn’t exempt them from VAT.

That’s the thing isn’t it? It always comes down to money and Labour have such form for not seeing unintended consequences of policies that involve employers

Do you have any evidence for this? Labour has not been in government for fourteen years.

I’ve said on other threads that to announce this without having done a full impact assessment was madness. They should have announced a review and then following the results, a timetable which involves a gradual introduction to avoid disruption.

So for example applying it to those starting reception and Y7 from 2026. This would mean parents contemplating going private primary and secondary are aware of the full cost, which isn’t the case for those whose kids are already there.

I think it’s nasty to pit parents against each other. It all feels a bit culture war/populist.

Let's think about this...

A local private school near me (where several friends send their children) pay £7735 a term, so £23,205 a year. The government want 20% tax paid on that, so £4641.

Quite a lot of the children have now said they are leaving and have found state school places for September and others are still looking. So not only will the government NOT get the £4641 in tax, it will actually cost them £7500 as they will now have to pay for the state school place for that child.

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.

I work for a large corporate who did this.

Its been frankly a disaster. We just do not get the same service from the overseas staff.

We've ended up needing twice as many to get the output we get from the uk. The overseas teams are often hard working but don't think outside the box. Cultural differences have proved to be a bigger barrier than expected. In one country we had local line managers pressuring staff to not take holiday, no one dared report it due to local culture.

We've also had issues with higher staff turnover for myriad reasons.

The expected savings have not really materialised and some roles have already be onshored back to the UK but with a focus on lower cost uk locations like belfast & cardiff

But my taxes already pay for a state provided sofa (maybe several sofas) that I don't use and which benefits other families.

I'm also overpaying for my luxury sofa in order that some kids from poorer families can also enjoy a luxury sofa, and allowing others to share the facility of my luxury sofa in the name of charity. But Labour think I should pay even more despite it going against the customs of every other developed country and EU laws (which they appear to revere so greatly).

No I don’t think so. Ii think if you can afford the upmarket sofa you can afford to pay the tax on it. Your schools “contribution” in the form of the odd “event” is hardly charitable. Add up the VAT that would have been collected over the last 5 or 20 years. I’m pretty sure it would provide a fair amount of infrastructure like pools, and theatres and playing fields that we could ALL benefit from. I have no problem with public schools if they pay their way.

Or to put it another way, we can’t afford to subsidise you anymore.

The top 10% pay 99.9% of all tax in the UK including vat. So people shouldn’t really dismiss them.

There will be consequences to this policy in terms of reduced overall tax recipts, houses in Outstanding catchments becoming out of reach for anyone who isn’t a highearner (even to rent), and where you have multiple state school districts overlapping there will 100% be an attempt to cherrypick local private school children at the expense of local kids. Some councils are already allowing private school children to jump the queue for in-year admissions.

Also, for those parents who do remain in private school, the cohort will be richer overall and so there will be even less diversity at the top.

Really? State schools are prioritising privately educated children? How?

I pay £15k in tax every year & free up a space in state education that my child doesn’t use. I don’t get benefits. I don’t use the NHS. I and people like me who are among the top 10% of earners subsidise everyone - so I don’t see why I should be the one paying VAT. If anything everyone using state school should pay as most of their tax receipts (when you account for the government services they use) wouldn’t even cover a school dinner.

By prioritising private school pupils for waiting lists. We were even told by our counciller, who came to the school, that we shouldn’t worry if we needed to leave as we’d automatically be pushed up the queue. All 3 LAs around us have had a lowering of ofsted ratings recently due to expanding catchments out of our area into more deprived ones. They see this as an opportunity to level the field a bit & are already discussing the legality of making ALL existing children who don’t live locally reapply for their places.

Wealthy people do not just pay taxes, they also benefit from the taxes being paid. One of those benefits is a healthy, educated work force.

The implication to a lot of these discussions about schools is that privately educated people are just better than the rest of us: richer, cleverer, more hard working etc. As a privately educated person myself I call bullshit! The schools are a system for class segregation and I think they’re bad for everyone, including the people who go there.

I chose to send my dc state where they are thriving. Obviously I had to engage with a far from perfect system which feels unfair and out of control, and the only reason we have been allocated good schools is luck. I wish it wasn’t like this. But I also know that continued private school / class segregation is not the answer.

what I feel is really unfortunate about this Labour policy is that it feels like it is feeding into that antagonism between rich and poor, when it could be an opportunity to think about the kind of society we all want to share. Most of Europe educates its entire populations without the need for a private stream. It ought to be possible.

The top 10% pay 99.9% of all tax in the UK including vat. So people shouldn’t really dismiss them.

The top 10% (and im in the 1%) can make the amount of money they can in large part due to being in a developed economy with:

A well educated workforce
A developed transport network
Strong rule of law and clear, transparent jurisprudence
Low crime
Fast , widespread internet connectivity
High quality research universities
Good healthcare/public health and a healthy population
Benefits/social security net keeping labour costs down

Rich people don't generate money from thin air. Capitalist economics diverts the lions share of wealth creation towards asset owners but it takes a whole social structure for that wealth creation to be possible.