VAT on independent school fees - terms fees in lieu of notice

[JammyDragon]

Hi

The introduction of VAT on independent school fees is unsurprisingly getting a lot of coverage on this site/forum. I would like to share a scenario we're faced with to glean some views and opinions and perhaps some advice on legal recourse options we may have.

So.....we registered our Son at our local independent school back in March for the term beginning September 2024. Until now he has attended a state school. We signed the parent contract agreement with all the T&Cs you would normally expect, including the requirement for parents to provide a full terms notice of withdrawal of their child from the school. In the event of less than a full term's notice being provided the parents are liable to pay a full terms fees in lieu of notice. We understood all of this and the reasons why the school insists on this (as is normally the case with independent schools to control budgeting, staffing levels etc.).

However, 4 weeks after we signed the agreement the school notified all parents that their fees would be increasing by 8% from September 2024. This came as a shock as this had not been previously mentioned during the application and registration process. On checking the contract T&Cs we noted that the school reserves the right to increase fees but would always 'try' to provide a terms notice and if the increase was ever greater than 5% the terms fees in lieu of notice on withdrawal would be waived. In fairness to the school a terms notice had been provided in this case although unsurprisingly parents were not reminded of the release clause.

Despite this unforeseen increase taking us to our affordability limit, we decided to take it on the chin and continue with our plan to send our son to the school in September.

Fast forward to 29th July and the publication of the draft government legislation on the application of VAT on independent school fees from 1st January 2025. As most people with children in independent schools will be aware, the amount of VAT (up to the maximum 20%) passed on to parents is at the schools discretion, allowing the them to offset some of the VAT gains they will make on some of the capex and service costs when they become VAT registered to soften the impact on parents.

With a great deal of media coverage on the matter it became clear that many schools were informing parents of their specific plans with the majority planning to pass on between 15% and 20%.

On seeing the draft legislation announcement we immediately contacted the school to understand their position and plans for the proportion of VAT they would plan to pass on to parents from 1st January 2025. The school didn't respond to us individually but sent a letter to all parents explaining the general situation (with no specific details on percentage levels) explaining that an update would be provided before the start of term. This update never came and the school as yet still hasn't communicated anything further to parents on the matter.

Despite repeated requests for a response from the school to no avail, we had to make a decision based on the potential risk of a substantial increase in costs to us and informed the school that we would be withdrawing our son. The school responded to say that we would be liable for a terms fees in lieu of notice.

We have appealed against this decision citing not only the original unforeseen 8% increase but also the fact that the school have been unable or unwilling to provide us with the planned applied VAT percentage from January. There must be some certainty that the school will be applying at least 5%, but more likely 10-20%, and in our view that information, albeit provisional, should have been communicated to parents, as many other schools have, before the start of the academic year to allow parents to make informed decisions at that point rather disrupting their child's schooling a term or two into the academic year.

Clearly if this information had been provided in line with the schools own policy of 'trying to provide a terms notice of any fee increases' the terms fees in lieu of notice would be waived (if this increase was greater than 5%). The school's refusal to provide the information has allowed them to enforce the terms fees which is what they are now doing with us. The approximate cost of £6000 is not insignificant and we consider this to be extremely unfair.

We're therefore seeking any advice or opinions people may have. We understand that contractually, and to the letter of the law, we are liable for the term's fees but do we have any other legal recourse for appeal given the extenuating circumstances the VAT legislation has created and the unfair position the school is taking which appears to be at odds with it's own policy of fairness to parents?

Any advice and views gladly received....

So perhaps the fees could have been that bit lower all along.

That must be infuriating

Potentially yes maybe fees could have been lower but I am at peace with that 😌 my daughters happy within that learning environment it's been life changing after a terrible period of state secondary. What I am fearful of is the school not being able to sustain this and therefore am over paying my school fees currently to have a buffer. Also the fear of the school not being sustainable any other local options would be many thousands more if this happens it would mean mortgaging my property to pay fees. Potentially I have four and a half years of fees but then I look at my baby grandson and unless locally our state offering changes we maybe subsidising his fees in the future.

The schools must now do their Vat accounts and pay the 20% tax to the government. Like anyone else who is vat registered. They can lower the price to parents and pay 20% on that as some have chosen to do. None of you pay 5%. I would have expected the invoice to show the VAT you are paying. Legally it’s not 5% is it?

If they have lowered fees too much what are they no longer doing? Enhancing the estate? Offering bursaries? Cutting down on staff? There will be something. They have presumably taken a view on what parents can afford and pitched the fee accordingly so VAT at 20% has not been imposed on the previously higher fees in order to keep as many parents as possible.

Possibly. However, in most cases schools that don't pass on the full increase will be dipping into their reserves and/or making cuts in order to minimise the increase due to the imposition of VAT. If they are dipping into the reserves, it is not sustainable, so they are only delaying the inevitable. If they are making cuts, there are likely to be effects on the quality of their offering to pupils.

Agree @TizerorFizz I do understand VAT and wonder how they are going to balance the books. There does seem more drive to fundraise this seems to be driven by a core group of motivated parents ( something i feel unable to get involved in as my husband is disabled.) Currently my child is happy there no local educational options ( for context we live in Mid Wales ) my daughter is Autistic you pay what is on the invoice and pray it's all going to be okay. Five of my six children went through state education age range from 35 to 13 education has changed dramatically over the last twenty years. If I had a magic wand everything she gets now would be available at the local state secondary for every child.

@Widow2019 Ive often wondered why we cannot have hybrid state education. You pay the school for additional support. Less than private fees. We haven’t got enough money for all needs in state schools have we? Never have had though.

That is the answer @TizerorFizz

In effect, the system is similar to that in Ireland. All teacher salaries are paid by the state, regardless of the type of institution, so private schools just charge for the extras. Salaries are 90% of a school's costs, so private school in Ireland is often about 5k, and there is much less disingenuous hand-wringing about it than there is England.

@TizerorFizz , yes they have taken 1 lesson per week out of the timetable for my ds, he is in the 6th form so can manage an extra study session.

I would make a settlement offer OP - 25% of the outstanding amount. Inherent risk in every litigation regarless of who is technically correct. Have they filled the place do you know - they have an obligation to mitigate their loss too.