School fee VAT and the council, surely this can’t be happening?

[Sat100]

A close friend has told me that at their school, parents have had to move their child out due to being priced out and unfortunately there are no state school places available in the area. The council is now apparently paying the VAT on behalf of this family on account of the fact there is no space in the state sector within a certain mileage of their home. I am in disbelief…has anyone else heard of this happening?!

They aren't getting it anywhere else though. Plus once parents use up their savings, they become eligible for benefits.

Well, they might not even make the 10p, but how cold hearted to say a drastic change to education affecting hundreds of thousands of children is worthwhile for 10p!

As I said, many have pre-paid so they’re not paying VAT, but their schools can reclaim the input VAT, which they couldn’t before. It’s precisely why this policy could produce a net loss to the taxpayer.

@JustBecauseIcanComment
I’d also add that those who can’t afford the VAT are those that will move to state, at a cost to the state of £8k per child. So you have different groups of people

a) those paying the highest fees and who are more likely to have been able to access funds to pre-pay fees. The government receives no VAT on these fees, but the input VAT can be reclaimed. Boarding fees can exceed £60k a year. The government had assumed they’ll be receiving £10k VAT on this. In reality, a lot of families who could afford £50k will have pre-paid. This hasn’t been accounted for in the IFS figures.

b) Those paying fees whose wider family have stepped in to help. Grandparents paying fees avoid IHT. Some will have pre-paid (avoiding VAT altogether). Some will be paying going forward, paying 20% VAT but saving 40% IHT. This hasn’t been accounted for in the IFS figures.

c) families who’ll carry on paying regardless. In reality, these are not that many. Families are more likely to be wealthy enough to fall into a) or b), or be less well off and fall into d) and e)

d) Those stretching themselves to keep their children in their school, by reducing spending in the wider economy. They’ll be paying 20% on fees, but reduced spending elsewhere means less VAT, corporation tax, income tax, NIC etc. These other lost taxes haven’t been accounted for in the IFS figures.

e) Those who simply cannot afford VAT and who’ll move their children to state, or homeschool. State education comes at a cost of £8k per child, plus the lost VAT on fees. Home education might mean one parent gives up or reduces work, meaning they pay less income tax and NIC.

It is a short term problem. There will be some instances where DC are settled into their schools and other schools are full so the Council pay the funding. But they won't do that for new students, they will increase the PAN in state schools.

Most parents will still send their DC private. Yes some have paid upfront, but again new starters have not.

There will be the odd DC with an EHCP that the council will continue to fund. But your run of the mill private schools do not cater to SEN DC at all. Infact many DC suffer the trauma of attending there before becoming excluded and finding the support they need in state schools.

Woah, some sweeping assertions there about send in private.

as the mother of two send children in mainstream private the only trauma we encountered was in the state system.

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@Another76543 you aren’t saying anything new and again nothing you say is proven in terms of it being a net loss - only time will tell. But the fact I stated remains “VAT is being paid on school fees and that is an income to the public purse” - whether or not that income is lost immediately or not is irrelevant to the general public because they will never hear about little Tristan’s granny paying his fees upfront and therefore no VAT paid, or Alexa’s papa from Russia paying fees in advance etc. etc. Whether or not the policy will have a positive or negative impact on state provision only tine will tell. So for the last time my point that the government has an income from VAT stands.

It doesn’t have an income from lots of families. It has a loss. Plenty of families have paid zero output VAT, but the school can reclaim input VAT.

”whether or not that income is lost immediately or not is irrelevant to the general public because they will never hear about little Tristan’s granny paying his fees upfront and therefore no VAT paid”

Correct. The government will never admit they’ve made a loss.

What exactly is your point? They will have an income in that they will collect revenue from the policy. But that income will be offset by any decreases in other areas due to the policy - for example, a child moving to state education reduces expected income and increases costs.if income increases but costs increase faster, how is that in the public’s benefit.?

Really?????

But presumably they won't get the VAT back if they're just paying the cost of the VAT, because if they're not paying the actual fees it's not VAT the council itself is charged and can't therefore be reclaimed?

It’s a fair question from the pp

That has to hit the press.. what a bunch of spiteful idiots, so now the taxpayer is paying the VAT on the private schools.

Are we talking about children with a EHCP?

And then there is this. Labour thought about exempting all kids with SEN but decided not to because it wouldn't raise enough money.
That isn't DM skewing facts, that's a matter of public record from the court. So SEN kids are now cash cows.

https://www.dailymail.co.uk/news/article-14564465/amp/Labour-admit-considered-exempting-children-special-needs-VAT.html

Grandparents paying fees avoid IHT. Some will have pre-paid (avoiding VAT altogether). Some will be paying going forward, paying 20% VAT but saving 40% IHT. This hasn’t been accounted for in the IFS figures.

Anyone well advised/savvy enough to pay school fees to avoid IHT would have done so regardless of VAT, or would have looked for other ways to reduce IHT.

I agree with you that the policy won’t raise as much as projected, but this point is stretching it.

Do you fund the one to one for your DC?

The legal challenge to this policy is being fought for ALL children, not just our own. If they can get away with this then they 100% won't stop there and kids with SEN are even more at risk from future Labour policy!
So anyone who thinks this is just about kids in independent schools needs to take a long hard look at the Schools Bill and realise what parental rights Labour are about to take away. Listen very carefully to what they don't say when they are talking and please bust the myth that this version of Labour care about education, they really really don't!

Some families aren’t doing it to specifically save IHT. The VAT policy has pushed some parents to a point where they’d struggle to pay the fees, and grandparents are now stepping in to help where they haven’t before. The IHT savings a bonus they may not have focussed on before.

Hmmm. I doubt that anyone with enough money to do this hasn’t or wouldn’t have thought about IHT planning otherwise.

Whoever pays on an ongoing basis, the 20% VAT falls due. Separately, some people reduce IHT by careful planning.

If grandparents now pay fees where parents did before, parents have more disposable income.

I am happy to agree to differ on this.

https://www.bbc.co.uk/news/articles/cx2088mzdr8o.amp

BBC reporting on yesterday in court (day 2) - to provide further reassurance for the PP who said the Beeb weren’t covering it.

Final day today.

https://inews.co.uk/news/private-school-fees-hike-threat-to-human-rights-3617410?utm_campaign=social_fb_posts&utm_medium=social&utm_source=fb&fbclid=IwZXh0bgNhZW0CMTEAAR1asHSJoi4JOSDp59IvQzejElWvafT6hIYzOO_PqtnNB5cOhTxBbAqyx5k_aem_7p_dYbZN4WOc9U1gKE017g

https://www.standard.co.uk/news/uk/vat-private-schools-rachel-reeves-high-court-b1220078.html

https://www.telegraph.co.uk/news/2025/04/01/reeves-warned-private-school-tax-raid-harm-poor-families/

Reeves warned before implementation that VAT would impact lower income families

https://www.dailymail.co.uk/news/article-14560213/Labours-VAT-raid-private-schools-families-ill-thought-High-Court.html

Unfortunately I’d imagine any more VAT case high court coverage will be pushed out by Trump starting a global tariff trade war, there is little coverage of send issues anyway.
Ever since the Tories began accusing ‘sharp elbowed’ patents of bankrupting local councils by enforcing send law obligations (never mind central government funding for local councils was slashed by 30% since 2010 under the Tories). Labour has run with this narrative that it’s basically too expensive for the taxpayer to educate kids who can’t be in mainstream.

But in any case, it’s always been very difficult to get media coverage for issues about education and disability I think.