VAT and Bursary impact

[tam255]

For some parents in London on a reasonable income who can’t afford to buy in the catchment of a good/ outstanding school, sending to a private school with partial fee assistance/ bursary is the next best option.

Often these big private schools in London in fact often support the state sector, local schools in their area with use of facilities, pools, drama studios etc and are very generous indeed even with teaching staff, Saturday schools etc supporting local schools. This important fact just seems to be forgotten.

As for the student intake, in fact in London most of the private schools have more diversity than the superselective Grammar schools!! Getting a place into a superselective Grammar school for a child in London requires deep pockets. A bright child who cannot afford all the numerous tutors and mock classes etc has no chance of getting through a superselective grammar school and if you can’t afford to live in the catchment area of a good comprehensive will miss out there too.

The reality is that, if a child on a part bursary is in primary school yes, you could have an option to move to a state school at some point. However if a child on a part bursary say is in private secondary school yr 9 onwards ( where subject choices etc have been made) it’s going to be impossible to just change them to the state sector till sixth form.

Yes, there will always be millionaires and billionaires in the private schools but also a lot of parents who are covered partially with bursary’s. With all the vat added it will impact the bursaries which is sad and more importantly the support the private schools offer to the local state schools around in their catchment.

I’m highly amused by the idea of independent schools supporting the state sector.

I’ve worked in four state secondaries. Between them, my DC have been to four primaries and one secondary, in two very different education authorities.

I’ve never seen any kind of support from the private sector. In fact, my only contact with them is when their pupils move to my current school for A-Levels, because our results are significantly better than any of the local private schools.

Suggesting private schools should keep charitable status because of all the sterling work they do to support state schools is absolute bollocks.

Most of the better academic private day schools like those where my children went are not private equity run. Eg one is described as follows:

"The School was founded in 1561 by the Merchant Taylors’ Company, one of the Great Twelve City of London Livery Companies. In 1933, the School moved to its present site at Sandy Lodge in Northwood. In 1967, the Merchant Taylors’ Company appointed the Merchant Taylors’ Educational Trust (“MTET’),
a charitable trust set up for educational purposes, to take over the governance of Merchant Taylors’ School and St John's School. On 1 August 1997, MTS was incorporated as a private company limited by guarantee and was registered as a charity, taking over the business, assets and liabilities of Merchant Taylors’ School."

There are no profits being paid to shareholders.

On the question of bursaries more generally I believe VAT is charged on what is invoiced so if a parent is invoiced 50% of fees ie has a lower bill that is what 20% will be applied to. Since about 2010 private schools, opera houses and other similar organisations where they are charities must provide public benefit and this depends on how much spare money if they have. If they have very little then opening the tennis courts to locals at weekends may be enough. If they are really really rich then fully funded bursary places may be required etc. So if a private school has much less money due to the VAT and business rates changes which is very very likely as schools will be trying to swallow the VAT cost then they can offer fewer bursaries. This will also be fairer to those parents who are paying full fees, paying the highest UK tax burden for 70 years (which applies to higher earners who tend to use private schools - other people have had tax cuts since 201) and thirdly paying through their school fees to fund the fees sometimes for other people where one parent is simply choosing not to work!

That's because not all indy schools are charities so it may be that the ones near you aren't and therefore don't have to provide anything to meet that charitable status.
The Indy sector is complex and not 1 homogenous "type". More varied than state schools purely on the basis of being independent.

That's because not all indy schools are charities so it may be that the ones near you aren't and therefore don't have to provide anything to meet that charitable status.

Right? So, not charities, and should therefore be paying VAT…

But I’ve explained it.

No because VAT has nothing to do with charitable status. Even if they aren't charities they are still not for profit. They aren't profit making businesses

No you have given your opinion, you haven't given data or evidence to support that so what you've said isn't a fact.

I appreciate it but it goes against the rules of not for profit law for educational institutions in UK as set per government. Please see above the Wikipedia script which I copied.
Hence I am asking for evidence: example of schools or so on. And btw, I am not an enthusiast of private schools at all but I am aware of the law and that it for profit are illegal in the UK ( as per links I quoted above)

I have explained how it is possible for a school to ultimately not make a profit having paid its owners a sizeable amount as a management charge.

You will agree that schools charge fees and have costs, yes?

Fee income £5m
Costs £4.5m
Management charge £0.5m
Surplus/profit £0

Yes but you don't understand that thia money have to be invested in school and cannot go just in anybody's pocket unless it is a salary for specific job. This is not profit. This is turnover and not profit. You clearly don't have understanding the basic principles of business and what is profit

I am still waiting for the examples for profit based schools.-?

thia money have to be invested in school and cannot go just in anybody's pocket unless it is a salary for specific job

The management charge isn’t just money in someone’s pocket. It’s paying for HR support, finance systems, educational materials development, admin support etc from the central head office function which is sitting in a limited company. It isn’t just the direct costs of those functions either. There’s a margin on them because the limited company is allowed to make a profit. I.e, direct cost (which by the way is an allocation based on certain assumptions) £95. Charge to the school £100.

What is turnover and not profit?

They are quite different and not usually mixed up.

I wasn’t sure about for profit, so I googled it and very quickly came up with the following articles.

This article is how private equity firms are making money out of the SEND sector.
https://schoolsweek.co.uk/how-investors-are-making-millions-from-the-bankrupt-send-system/

And a quick google about for profit education in the UK showed this, an old article, but they are still going and have been bought by another education company.
https://www.ft.com/content/4756c4b0-a5c4-3dd2-adea-fba44cfab244
https://www.crunchbase.com/organization/alpha-plus-group

Knock yourself out https://find-and-update.company-information.service.gov.uk/company/14268725/filing-history

The 2023 accounts are 63 pages but the revenue note shows the vast majority of fee income is from the UK £200m versus total revenue of £230m.

@PeachSalad you need to use better sources than wiki. That is just plain incorrect. For-profit schools are absolutely allowed in the UK. If they are independent and not charities.

Taking as an example the profit-making parts of the independent special schools sector, several are owned by sovereign wealth funds or other large private equity firms. And profit making is not limited to the independent special schools sector. Any independent school that is not a charity is wholly permitted to make healthy profits.

SEND is a complete racket. I was having a discussion with a parent whose child receives 90k+ per annum of EHCP funding to attend an autism specialist setting, granted that may be the only suitable local placement for that child. He was ardently pro VAT, no other experience of the independent sector and was convinced that any school charging less than 90k is substandard. Looking at the schools accounts was very interesting!

I find it absolutely obscene that local authorities can justify that level of spending on ONE child. And as awful as it sounds there has to be some checks and balances. Spending over 500k of taxpayers money, educating a single child whose outcomes aren’t guaranteed doesn’t sound like a good investment to me.

Turnover is profit and expenses. Profit is after the expenses.

In the private schools the profit doesn't go to the private owner because they are " not for profit " organisations. It is invested in the school, students

https://www.independent.co.uk/news/uk/politics/forprofit-schools-have-no-place-in-britain-says-tory-education-secretary-nicky-morgan-10257148.html

Independent doesn't mean for an individual profit. Please make an effort of reading this article because you are wrong

Income does not mean profit. Every private school has an income. But the profit has to be re-invested in school, salaries etc

Dukes Holdings is an organisation that have salaried directors implement their duties under section 172 of the Companies Act 2006. Salaries are not profit but income in return of work. Directors are in the board and they appoint a headmaster.

For profit organisations are e.g. private entities ( owner takes profit to his pocket and if his companu bankrupts he also does), partnership ( non limited because there are also limited) and corporations ( the profit is sold as shares)

Schools in UK are not allowed to be for profit. They can be registered as charities and as not for profit organisations. They are managed by the boards ( salaried or not)

@Boater
Dukes Education is not for profit as all private schools in UK. At a higher education level only exist some private, for profit.

@PeachSalad I don’t know how to put this differently. You. Are. Completely. Incorrect. Profit making and taking is completely allowed unless you have charitable status.

This article is referring to profit making in the state sector. Not in the independent sector. Are you confused because free schools and academies are technically ‘independent schools’ ? These schools are not allowed to make a profit

really, trust us on this one. Profit making is absolutely allowed and there are plenty of institutional investors in the private fee paying school sector. They aren’t in it for the philanthropy.

And Dukes Education is backed by Private Equity by the way.