The government has published its proposals to remove VAT exemption, and charitable rate relief, to private schools. CFG's Head of Policy, Richard Sagar, provides an overview.
As set out in the Labour Manifesto, the government has published its plans to remove the VAT exemption for private schools across the UK. The draft legislation, a corresponding explanatory note, and a technical note on applying VAT to private school fees, have been provided.
The government's proposals state that from '1 January 2025, all education services and vocational training supplied by a private school, or a 'connected person', for a charge will be subject to VAT at the standard rate of 20%. Boarding services closely related to such a supply will also be subject to VAT at 20%.'
To prevent the pre-payment of fees in order to avoid this additional tax, the government has stated that 'any fees paid from 29 July 2024 pertaining to the term starting in January 2025 onwards will be subject to VAT.'
Concerns had been raised by some in the charity sector that the proposals would negatively impact special educational needs (SEN) schools and pupils. To address these concerns, the government's technical note clearly states that it is committed to ensuring that those 'with the most acute SEN' are not impacted.
The technical note also states: 'Where pupils are placed in a private school because their needs cannot be met in the state sector, and they have their places funded by their Locally Authority (LA), a devolved government, or a non departmental public body, their funder will be compensated for the VAT they incur on these pupils’ fees'.
However, parents who chose to send their SEN children to private school, whose needs can be met in the state sector, will be subject to VAT on their school's fees.
The Treasury has opened a seven-week consultation, closing on 15 September with a list of questions found in the technical note.
Removing charitable business rates relief for private schools in England
The government plans to remove charitable business rates relief for private schools in England, so that private schools will be required to pay their full business rates liability. This won’t apply to other parts of the UK as business rates are devolved in other nations.
There are not too many details as of yet, but the government has also taken on board some of the concerns put forward about pupils with SEN attending these schools. They will consider 'how to address the potential impact of these changes in cases where private school provision has been specified for pupils through an EHCP' (Education, Health and Care Plan).
The mechanism to achieve this will be a bill to amend the Local Government Finance Act 1988, which will be introduced following the Budget on 30 October, intended to take effect from April 2025.
Once we have further details on the bill, we will look to engage with the relevant government departments.
Relevant resources
VAT on Private School Fees & Removing the Charitable Rates Relief for Private Schools - GOV.UK (www.gov.uk)
Technical_Note_-_DIGITAL.pdf (publishing.service.gov.uk)
Private_Schools_Draft_Legislation_-_DIGITAL.pdf (publishing.service.gov.uk)
Private_Schools_EN_-_FINAL_-_DIGITAL.pdf (publishing.service.gov.uk)
For more information, or to share your thoughts, please email the policy team.