News and Updates 

VAT on Independent school fees

I've heard so much over the last couple of weeks about Labour's move to remove the VAT exemption on independent schools and also to remove their charitable status. This has been a long ongoing debate and launched some years ago (before the pandemic) in the Labour party's manifesto.

The removal of the VAT exemption would be a double edged sword. The removal of the exemption would mean 20% VAT to be declared on school fees, no doubt increasing fees to parents.

However the other side of the coin would be the recovery of input VAT on associated costs. This is a hidden cost in the accounts of these schools as it is not separately identified and added into expenditure. Although this would be a reduction in cost which would be very welcome given the current level of inflation it is unlikely to mitigate the VAT due on school fees. Given a significant amount of cost for these Schools are people which do not incur VAT, this does not help with the proposed VAT burden.

The sums the Government intend to gain from this change is over £1bn. There will undoubtedly be increased pressure on the state schools where parents cannot afford a 20% increase and remove their children from independent schools altogether.

The change would depend on a number of factors namely a change in Government, a change in primary legislation and support for this change.

Independent Schools do need to be considering the impact of the change. There are significant VAT aspects to consider and in particular if any capital projects are being considered.

Do please get in contact if you would like to discuss this further.