Scholarship holders: how does VAT work?

[PopcornPoppingInAPan]

Hello, I wondered if anyone with a child holding a scholarship could explain how VAT works please?

We are very proud of our son who has been offered a 11+ scholarship (fee remission) “worth 20% of the tuition fee (excluding VAT).”
But we’re not sure how this is calculated in practice.

For the sake of simplicity, assume the fees are £8k per term net. Do the school:

1. apply the 20% remission (£1600) to the net amount of fees giving £6,400, then add VAT giving a total for is to pay of £7680? OR
2. do they include the full gross amount of fees on the invoice: £9,600, then apply a remission of 20% of the NET fees (£1600), leaving us to pay £8000?

The cost to the school would be the same either way but I don’t know how the VAT rules require them to deal with fee remissions. Are they a “discount” on fees that fall to be taxed or instead akin to a payment back to us/a credit on our invoice?

Obviously we’ll find out in due course, but am curious to know as it makes quite a difference over the 7 years of schooling. I could ask the school direct but I know the admissions team is very busy and I don’t want it to look like we’re nitpicking when we’re hugely grateful to be offered anything.

thanks!

If you have a discounted fee, you pay VAT on the price you pay, not the full price.

As PP says, you pay VAT on the amount of fees you pay (so full price - scholarship amount).

1. do they include the full gross amount of fees on the invoice: £9,600, then apply a remission of 20% of the NET fees (£1600), leaving us to pay £8000?

If we do the math properly: 6400+20%=6400+1280=7680.

In any case you pay £7680.

Might also be worth checking if the school is passing on the full amount. Mine does but 2 more local ones have apparently swallowed most of the extra (for this year at least) as they are in competition with each other. Not sure how true it is but thought I'd pass it on as you may have less to worry about.

The school charges £8k and then has to add £2k which they pass on to the government.

Because of the scholarship, the school would charge you 20% less i,e, £6400 and then would add VAT of 20% to this.

i.e. option 1 in your OP.

You always only pay VAT on the actual amount charged, never on the full-pre-discount price.

Ignore the side-track about "not passing the full amount on" - that's a distraction. If a school is choosing to reduce it's pre-VAT fee to reduce the overall increase that's their choice, but the amount of VAT is always 20% of the net amount actually charged.

Thank you all!