Why aren’t people angrier at schools passing on full 20% VAT rise

[Newbutoldfather]

From what I can read, schools can claw back around 5% of the 20% of the VAT rise and, arguably, for the rich and famous schools, more than that due to past capital expenditure.

And yet most of these are passing on the entire 20% to parents so, in effect, a sneaky 5% fee rise, on top of this year’s existing fee rise.

So, why no anger or threads on here about it?

Just terrible…It’s almost as if these schools only care about making money 🤔

The VAT is the least of most school's worries - it's the loss of charitable business rate relief will be a lot for most. Private schools can't be treated and charged as businesses but act like charities.

The big, public schools might well be able to carry on more or less as they were but most independent schools aren't like that

But plenty of schools (see other live threads) aren’t increasing by 20% - they are reducing base fees and then putting the 20% onto the lower base fee.

You also can’t say that because the average reclaim is 5 % that every school can just assume they can do that - it will depend if they have had recent significant works or not.

I'm not entirely sure that everybody actually understands how VAT works.

The vast majority of people do not.

Keeps us accountants well paid that way !

Yep 12% here, not outraged

Yes - the loss of the business rates relief is a really big deal, and one that is getting lost in the all the VAT chat. VAT is charged directly to the consumer by the school, but the schools will have to find the extra for the business rates from nowhere (contrary to popular belief, the majority of schools are not running the kinds of surpluses people think, or even any surplus at all in many cases).

And it really isn’t teachers’ salaries, these have been in decline in real terms for pushing 20 years now.

I don’t agree;

Also, the contribution required from private schools for teachers to stay in the TPS (most teachers want to) increased in April too, so this along with increased electricity costs, lending costs for any projects etc etc also put upward pressure on base fees.

it’s complicated and each school will have their own economic context to consider. Enrolment rates are drown at dc’s school as a result of vat, but costs don’t drop proportionately. Some schools may have less to reclaim vat wise, or there may be cash flow issues associated with dropping fees immediately. The full details of the policy haven’t been announced, nor is the full impact on enrolment clear, so some schools may be rightfully cautious in lowering fees.

our school is taking quite a staggered approach to insulate parents against a sudden spike, but in part they can do that because they raised feed more than usual for this year already. I anticipate further higher than normal increases over the next couple of years. Other local privates had lower annual increases but will see 15-20% increase with immediate effect - in 3 years I expect we will all be paying roughly the same regardless of whether they ‘pass on’ 20% immediately or not.

Agree with @Labraradabrador

Also let’s not forget that - by definition - private schools haven’t needed to have VAT experts on the payroll or on speed dial until now. They won’t have the details of capital allowances etc at their fingertips in the way that a retail business might, and they will have to dig through past accounts and invoices and rules (or pay someone to do it) to see what they actually can recover and over what time period.

overly privileged arsehole children.

Not sure this qualifies for the first few words of your post

Exactly. It’s parents that end up paying the Vat, which is 20% as set by law. That’s the nature of Vat. The supplier does not “absorb” anything, just collects the tax for HMRC.

Most private schools are charities and cannot make money. Why do people insist on posting about things they know nothing about ?

Anyone who calls a child an arsehole just because of the financial situation of their parent is themselves an arsehole.

@LivelyBlake ,

‘Exactly. It’s parents that end up paying the Vat, which is 20% as set by law. That’s the nature of Vat. The supplier does not “absorb” anything, just collects the tax for HMRC.’

I find this kind of hair splitting defensiveness really strange.

Obviously ‘absorbing’ means lowering the fees and then adding on 20%, and clearly they will have a debit of the VAT at 20% and a credit of the reclaimed VAT in the same column of the fee and other income at about 5%. This thread was about net cost, not how they are going to do the accounting.

And the vast majority of private schools will have a bursar on around £80-100k per annum who will have other staff working for them. So I really don’t think it will cost a lot of time or money adding VAT to the system.

OP - VAT is a sales tax. It’s a tax paid by the consumer, at a rate set by the government, but collected by the vendor/service provider. The schools have to collect and give it to the government.

Some have reduced the impact on parents by reducing the school fees so the parents have to pay 20% of a smaller amount.

Some have not increased fees, the parent has to pay 20% more, but the school is still down 5% as they haven’t increased fees to take account of inflation. And that’s not even factoring in business rates.

Many, many schools simply can’t afford to cut school fees as they need to balance their books. It’s very simple!

Obviously ‘absorbing’ means lowering the fees and then adding on 20%

Sorry, but the thousands of posts on hundreds of threads about VAT make it really clear that nothing is "obvious". Even the government has repeatedly said that "schools don't have to pass on the whole 20%" The schools literally do have to pass on the full 20%. How they mitigate the pain of that for parents by other means is another matter. Govt and many people here have also said over and over that private schools are getting a tax break by not having to pay VAT. The school isn't getting the "break", it's the parents - VAT is charged to the consumer, not the supplier. (Not that anyone was actually getting "a tax break")

The PP up thread who said that many people don't really understand VAT was correct.

This just sounds like victim blaming. The schools shouldn’t be in this position.

12.5% increase for our daughter's school (Hertfordshire) and no increase for students on bursaries - but they are also now considering going co-ed due to a recent merger with a bigger group - not specifically due to VAT - which may impact those who chose the school specifically for being single sex (not us, we just loved the school and honestly wish our son could go too). TBD on son's school as he's not due to start until next September.

@Labtastic ,

‘Even the government has repeatedly said that "schools don't have to pass on the whole 20%" ‘

They clearly mean that the fees that the parents pay doesn’t have to rise by 20%.

Isn’t the above obvious?

They are not talking about what is printed in the bill but the net effect to the bill payer.

There are a lot of very literal minded people on here.

OP - fees and vat are literal things. The schools have to balance the books and they have to collect VAT at 20% of the fees. If the school can’t afford to reduce the fees then the customer will have to pay the fees +20%, anything else is tax evasion!!

They are not businesses. They are charities. Their function is to provide high quality education on a good value basis, not to be looking to gouge the fee payers.

They bloody are!

OP - it is the government that is being disingenuous, not the schools.

They clearly mean that the fees that the parents pay doesn’t have to rise by 20%.

So maybe they should just say that. But they don't, because this way they can make out as though it's within the schools' gift to decide how much to charge, and therefore paint them as the bad guys when they add the full 20% to the bill.