GPs paying private school fees

[pinefresh]

We are in the very fortunate position that my parents have offered to pay a sizeable chunk towards independent school fees from next year. Can anyone tell me how this usually works in practice? Would money usually be paid direct to the school, or via us? Do schools actually invoice GPs for a set amount, or do parents just tell GPs when fees are due and they proactively send a cheque? Maybe it varies from school to school. Is there anything else I ought to be thinking about? I know I probably sound horribly entitled, but I'd really like to understand the practicalities of this before I talk to my parents in detail about their incredibly generous offer.

some one with actual knowledge may be along to answer but in the meantime you'll have to make do with my fairly ill-informed stab.

it can be either, but either you or your parents will need to sign something undertaking to pay the fees and abide by the terms & conditions. whoever signs that document should be the one making the payments to the school because they are the ones who are going to get sued if a payment is missed (especially if for any reason the DC needs to change schools and you gave to forfeit a term's fees).

However, there are tax dodges that can be used here which may mean it makes sense for the money not to touch your account. I think I read about a legal setup whereby if the GPs are very wealthy they can put a large sum in a benefitial trust which expects to create annual income approximately equal to the amount of school fees. if the trust is instructed to pay that income directly for the benefit of the named DC then no one has to pay income tax on the vast majority of that investment income as the Child's tax free allowance is being used (I expect there would be tax due on the difference between the school fees and the tax threshold)

Thanks. I was thinking more about the practicalities of payment than the tax, but that's v useful info. The only tax side I thought about was IHT, which I think would apply if they paid the money to us (which is why I thought about it being paid straight to the school). If it was a beneficial trust, would that mean that the amount invested would need to be massive in order to generate sufficient income (c 5k per year)? I wouldn't want to ask them to tie up any more money than the amount they wanted to give.

I might post on the Education thread to see if people can tell me how they sort out these payments.

Thanks again.

The IHT issue would depend if its capital or income, but going via you isn’t an issue really as you are taking it on trust, however it’s cleaner to do it direct.

Is there a reason you're worried about the mechanics of the payment?

I know a few people who have grandparents paying fees so I assume it's a fairly common thing, I'd ask the school what they would prefer, I imagine there will be some form of legal agreement so they have someone to chase of the fees aren't paid but they wouldn't mind whose bank account it was coming from would they?

Ask the school. They will have others that do this to and can recommend the best way

Our school had a fee in advance scheme where you can pay 5 years up front and get a very very small discount. I believe that a lot of grandparents pay this way. But each school will be different.

Thanks everyone, I'll speak to the school. This is all new to me, so just trying to understand it all! I don't know much about tax tbh;. I assumed that everything that came via us would be potentially liable to IHT.

I’ve been wondering this myself and I was never sure about the distinction between paying fees and a gift for IHT purposes.

It will only be used towards the IHT calculation if they die within 7 years of giving the gift, and then there is a £3,000 per year exemption . So you wouldn’t pay any IHT on it, that would be paid by their estate, the gift would just be used for the calculation.

I would recommend that you get them to agree to pay the school directly so you don’t have to outright chase them for a cheque if they ‘forget’ a payment.

I’d also ask them to make provision in case they die before the child finishes school, one of my friends had to leave her fee paying school when her grandad, who was paying, died and it was obviously unsettling for her at an already difficult time.

We were in a similar, very fortunate position. The fees ended for us 7 years ago, but I must admit I didn’t consider any tax implications at the time. My parents transferred money into my account (a separate account from my current account which was only used for the fees) about three times a year and I had a direct debit paying the school monthly.