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?

Remember schools are having to factor in the removal of the 75% relief they currently have on business rates too.

Why - looks like you'll still visit and comment on them!

Nope- it came up in active and I added one comment- never visited the board before and never will again. But this same tired old topic will still be everywhere 😴

@Sandysoles ,

‘OP - the massive increase in pension contributions, national insurance, energy costs, inflation in other supplies (second highest cost is food + fuel) has needed to be covered, that’s why fees have risen. + reduced income over lockdowns when many schools gave a significant fee reduction.’

It really couldn’t be made up.

When I explain that the average school should be ‘passing on’ (in the colloquial, not accounting sense) no more than 15%, and it should be less if they want to keep their less well off students, everyone says costs are mostly staff salaries (which they are).

When I produce evidence that teaching salaries have gone up by less than general inflation over a decade and a half, people bring up other costs.

(Loss of business tax relief is a fair point, but in most schools accounts for less than 1% of costs, with the most expensive being the ones who can reclaim the most VAT due to building work).

It obviously has nothing to do with the new and expanded marketing department, the expanded SLT with at least five ‘directors’, the climbing wall, the counsellors on tap taking up a whole floor of a building etc etc!!

There has been an acknowledged arms race of facilities and other luxuries in private schools to compete for the best off parents and they really haven’t minded losing their more ‘ordinary’ (in terms of wealth) parents. For many parents, private schools are like Hermes scarfs or Patek Phillipe watches, they wouldn’t have the same appeal if ordinary people could afford them.

(and, I think we need the acronym, yes I know NAPSALT).

Just hide the threads then. Every one of these threads have a post such as yours.

“When I produce evidence that teaching salaries have gone up by less than general inflation over a decade and a half, people bring up other costs”

I am not sure how the last decade and a half is relevant to the last few months. And the TPS contribution went up in itself from 23% to 28% in April.

And people bring up other costs that have gone up because, well, other costs have gone up, since Trussonomics - again, more recent than a view of the last 15 years.

@SheilaFentiman ,

A lot (the majority I think?) of schools have pulled out of the TPS or are asking staff to contribute if they want to remain in it.

The longer view is the more interesting one and a guide to how private schools might absorb some of the VAT (or reduce the actual fees).

The arms race has excluded more and more people from the sector and could easily be rolled back a bit.

When I started teaching at a very nice private school in Central London 10 years ago my mentor who was senior in SLT discussed with me the conference she had just attended ‘Providing a Bespoke Education’ and said that was the current trend. I just don’t even think that is healthy for pupils and obviously comes at huge expense.

Lots of people don't understand basic tax accounting - schools, much like my business must now be registered for, and charge VAT.

They cannot charge 12% or 15%, they have to charge 20%, if they reduce their fee so the increase on the current fee is 12 or 15% so be it, but they have to charge 20.

They can then claim back VAT where applicable on purchases.

So no school is charging less than 20% VAT, that would be illegal.

Interestingly a bursar I know says HMRC will still not let their school register for VAT as "they are not ready yet" I can see it all ending in tears!

So your argument is less about how much VAT can be reclaimed on the new science block and more about whether private schools should reduce their offering?

Mind, given you are scathing about private schools offering access to counselling, I suspect we have different ideas on what is important.

I can see that if there was a recent big building project, you could get a buffer for a few years. I can also see that a charity can have a small surplus which it is now using to create a buffer. Then plan to reduce service over a couple of years whilst the buffer is active

But I do think wonder if some of the schools reducing fees by The bigger percentages were being pretty wasteful with parents money as they didn't need bother to be careful.

@SheilaFentiman ,

‘So your argument is less about how much VAT can be reclaimed on the new science block and more about whether private schools should reduce their offering?
Mind, given you are scathing about private schools offering access to counselling, I suspect we have different ideas on what is important.’

Well, my argument is that at least the arms race can be paused and a deep review undertaken into value for money and what is really being done to help pupils and what is being done to impress parents, which are sometimes polar opposites.

In-school counselling just wasn’t a thing in schools 10-15 years ago, and in private schools it is totally unnecessary, as parents can easily afford counsellors out of school hours where required. The space they take up is expensive. They are also a weird way of getting 90% of parents to fund counselling for 10% of pupils, so a kind of in house tax on the pupils who neither require nor want counselling services.

But counselling is just one way in which, as a PP said, schools can be pretty careless with parents’ money and could painlessly make significant savings (NAPSALT).

Edit:

"Why are some people so angry that people aren't angrier about the probable VAT rise?"

From a purely business perspective, OP, if counsellors can reduce the time pupils have off with MH issues, thereby improving results, then they are money well spent. Not to mention that suicides are bad press for schools.

I would hope as a (former?) teacher, you had a more compassionate POV than the purely monetary. But there’s the mercenary argument if you want it.

I suspect you aren’t particularly in good faith, though, so I will leave the thread now and request you do not tag me further.

“Interestingly a bursar I know says HMRC will still not let their school register for VAT as "they are not ready yet" I can see it all ending in tears!”

@LovingCritic - we know HMRC is already understaffed. This will be the next article in the Torygraph. Rather than go after real tax fraud, the powers to be are going to have to staff at the taxpayer’s expense a whole VAT private school department. Someone needs to do the cost benefit analysis on that one.

Are you ever going to run out of spurious reasons for objecting to this tax?

It’s no more complicated than collecting VAT from businesses, and 277,000 registered last year.

There are 2500 private schools.

The reason they can’t register yet is because the scheme isn’t open yet. Whoever this megabrain accountant is should read the guidance.

@DadJoke - it is not spurious reasons, whatsoever.

In Switzerland, the a group of far left young socialists are trying to bring a Referendum to tax estate over 50 million with a hefty inheritance tax bill. Guess what - there the Central Government is massively resisting that because they fully understand the consequences for the country.
Meanwhile here, our very green very naive current Government is condoning these types of policies which will lead to immense harm for the country as a whole long-term.

@DadJoke - in fact you should have learnt from Brexit!

Whilst we are sitting here, knowing full well Starmer is a complete centrist, foreign governments in Europe and further ashore do not see that. They see two crazy far left policies on taxing non doms inheritance tax and taxing education. That sends a message internationally and weakens the country. It means capital flight. So much is about perception, you should have learnt that during the Brexit process.
So I hope you are ready for what is to come.

@Araminta1003 yes of course your friend who can’t read HMRC guidance was a spurious reason for not introducing VAT on private schools.

It’s funny and again entirely spurious that you mention capital flight from the UK. The main reason people have been leaving the UK begins with a B and ends with a lettuce.

You think most kids at private schools have multi millionaire parents? Our income is low six figures. Too much for a bursary, certainly not millionaires or anywhere close to it. Most of the parents at our small private school in the midlands are in a similar boat.
Anyway, in response to the OP, ours is passing on 10%.

@DadJoke - are you really going to deny that a tax on education does not have the potential to freak out international university students as well? And what would the consequences of that be? Coupled with the rhetoric all over the press that fees may be going up.

Where do you get the 5% from OP?

My understanding is that schools don’t pay much VAT - and therefore there will be very little VAT for them to reclaim. Unless they’ve done a big building project. The bulk of their costs are staff salaries which are non VATable. There will be a bit of VAT on utilities and stationery/other kit but doubt that would add up to 5% of fees.

@DadJoke - successful people are leaving the UK because it seems to be on a way way course down to the bottom of the sea. So they are pulling their kids out of the ship and creating opportunities elsewhere, if they can. It is not just non doms leaving, sadly.
I am going to say this again. Retention is the key thing here. Retention of teachers, doctors, young talented people across the board from state to private, uni students, working class students, absolutely everyone has to work together in a harmonious whole. Division and hate policies are most definitely not the answer! They have the exact opposite effect.
If you think the true British elite in the top public schools are not going to double down again on a secret handshake after this latest VAT antics, think again.

No, I predict that it will have zero effect on the university sector.

What’s much more likely to “freak out” foreign students are visa restrictions.

“No, I predict that it will have zero effect on the university sector.
What’s much more likely to “freak out” foreign students are visa restrictions.”

@Dadjoke - and here we have proof of you making it partisan, yet again. Do you really think an international student has any clue over the nuances of the Red vs Blue discussion in the UK? The answer is a big fat no.

People are leaving the UK because of Brexit and 14 years of chaotic Tory government, lack of infrastructure investment, clogged up courts and a hostile attitude to immigration.

At least the British elite will be paying VAT on their school fees. What is your position- it will be no problem for them, or they will flee the country?

You are all over the place. Why are you so emotionally invested in this?