Advice, Articles, Focus

VAT on School Fees – A Briefing for Parents

VAT on School Fees – A Briefing for Parents

The Labour Party has stated it will put VAT on school fees if it wins the election. What does this mean in practical terms for parents and for schools? It has been projected to raise £ 1.6 billion in revenue that will be spent on state schools and additional teachers. What is the reality? 

There are around 2,600 independent schools who educate about 615,000 children aged from 3 to 18. Just over 7% of schoolchildren are educated privately ie paying fees in the UK. Only 300 roughly of these schools are “public schools” or members of the HMC (Headmasters’ Conference). 

Private schools come in many types – famous ancient establishments like Eton and Winchester, both originally religious foundations, down to small private schools catering for an area or type of child (eg dyslexic or autistic) as well as choir schools, and many small religious schools. Very commonly, they have smaller class sizes and maintain a wide range of subjects including music, performance and sports. 

Many of the larger schools now have overseas schools. British independent education is considered a considerable success overseas, and many schools have regular intakes of overseas students, in particular boarding schools. It is to be noted 18% of children over 16 are educated at private schools. 

Most have either charitable status or are non-profit companies limited by guarantee. 

The Labour Party has traditionally viewed fee-paying schools as a prerogative of the well-off and has at various times since the Second World War proposed their abolition or restriction. The current proposal can be seen as a tax raising proposal or as an ideological one, that is in social class terms. But what will be its effect? 

The Labour Party has not given any details yet about its proposal, nor engaged with the various bodies who run fee-paying schools, grouped under the ISC-Independent Schools Council, despite several approaches the past year. The imponderables of this proposal are: 
a) if they will win the election b) any size of majority if they do win which may affect their plans  c) when and at what rate VAT will be brought in d) whether it will be retrospective to cover fees paid in advance. 

Various press reports state levels of possible withdrawal of pupils if VAT is put on, especially if it is immediate and at 20%. It will affect those schools who operate on narrow margins and have not reserves of funds or assets, which applies to most of the smaller independent schools. There are concerns that the state system is not in a position to absorb pupils easily, especially any with SEN (Special Educational Needs). Currently, the Child Mental Health services are overwhelmed with referrals and requests, and are unable to cope as it is. It is a fact that many of the smaller independent schools can provide a high level of pastoral care because of smaller class sizes. At the moment schools cannot plan ahead as there have been no details about the Labour Party proposals. 

There has also been no assessment of the costs and benefits of such a proposal, and any unintended consequences (eg closure of a school and the ability of the local state schools to absorb pupils). There have been press reports of a higher level of applications to grammar schools that are not fee-paying as a result of the policy proposal. It is not possible to give reliable statistics about the effect of Labour’s plans, not least because no details have been forthcoming.

What should parents do, either if they have their children in an independent school or are thinking about it? 

Firstly, they should speak to the school itself and see if there is any way the VAT might be ameliorated. Some schools are advising parents to pay in advance, but it is not known if Labour will still apply VAT to fees for an academic year whether paid in advance or during the year. Secondly, parents can explore with schools if they have plans to mitigate VAT by reclaiming VAT they have not been able to before, or by other means. Other costs for schools may rise as presently most non-profit companies which includes schools have relief on business rates. This if removed will add considerable annual costs over and above any VAT put directly on school fees. Some schools may discount fees so that any VAT imposed does not bring an increase as large as the full 20%.  It is also unclear whether trip costs, tutorial costs especially for SEN pupils and other costs will be charged VAT. 

It has also been mooted that the large range of bursaries and scholarships in independent schools may be lessened or lost, which may disproportionately affect children with special needs or special talents. 

Over the past few months, the proposal has received generally unfavourable press due it its lack of detail, the absence of any research or assessment of the costs and benefits of the proposal, the burdens that any transfer of pupils or even more school closure will add to an already burdened state education system, and the loss of support for children with special needs which is a particular feature of independent schools. These children would become the responsibility of the state. Also any loss of jobs due to school closures has to be considered. 

On the other hand, school fees have risen above inflation the last few years and the Labour Party argues schools will be able to make costs savings and adapt to any VAT imposed and loss of business rates relief.

As the ISC stated recently:
“As the election campaign continues, we are expecting more coverage on Labour’s policy to place VAT on independent school fees. We know that this increased focus, combined with the lack of information about the policy, may prove stressful as the media, parents and staff ask questions that are not necessarily possible to answer at this time.”

For any concerned parent, direct communication with the school is the only way to try to ascertain what might be the impact of any VAT levy, and what it may mean for the education actual and prospective of their child or children. 

 

 

Edmund Matyjaszek 

Proprietor & Bursar, Priory School of Our Lady of Walsingham

 

Leave a Reply