Why is VAT being added to private school fees?
More details have been published regarding Chancellor Rachel Reeves' plans to impose a VAT charge on private school fees. The government has said that the money raised by ending the tax breaks on VAT and business rates for private schools will help secure additional funding for state education programs.
When will these VAT changes come into effect?
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 provided by a private school or a connected person will also be subject to VAT at 20%. In addition, any fees paid from 29 July 2024 pertaining to the term starting in January 2025 onwards will be subject to VAT. Boarding and lodging for such supplies will also be subject to 20% VAT.
Are there any other changes for private schools?
The government has also said it will legislate to remove the eligibility of private schools in England for business rates and charitable rates relief. However, the government accepts that some students with special educational needs may require the specific support available only in private schools. As a result, the government will review how to mitigate the potential effects of these changes for students whose private school placement is outlined in an Education, Health, and Care Plan (EHCP).
Schools that do not currently make any taxable supplies, such as renting out their facilities, will be able to register with HMRC starting from 30 October 2024, the date of the Autumn Budget. Schools that already make taxable supplies can choose to register for VAT before 30 October if they so wish.
School fees paid before 29 July 2024 will follow the VAT treatment in force at the normal tax point for these supplies, where the fee rate for the relevant term has been set and was known at the time of payment.
Contact us
If you are concerned about the effect that the latest VAT legislation could have on your business, contact Moore South today. Our education specialists can help you understand the new requirements and their effects on your school and your pupils' parents.