With the introduction of VAT on school fees in January 2025, it is essential that your accounting system is compatible with the new changes. The school accounting system should comply with Making Tax Digital (MTD) regulations and be listed on the official government website for MTD-compliant VAT software. Find software for Making Tax Digital for VAT here.
If the current software lacks this feature, two alternatives are available:
- Utilise a bridging software to submit VAT returns each quarter; or
- Switch to an MTD-compliant software.
Between taxable and non-taxable transactions, other educational services may remain exempt or zero.
Fee invoices
Invoice templates for the school fees must be updated to include:
- A unique identification number
- Your school’s name, address, and contact information
- The name and address of the parent/guardian you’re invoicing
- A clear description of what you’re charging for
- The date the goods or service(s) were provided (supply date)
- The date of the invoice
- The amount(s) being charged
- VAT amount, if applicable
- The total amount due
Documentation
Additionally, your accounting system must maintain an accurate and detailed audit trail of all VAT-related transactions. This includes copies of all invoices, receipts, and relevant documents for six years after the VAT period.
Accounting for transactions
Each school will need to understand the implications of using the VAT codes against the correct transactions. The definitions of zero-rated, exempt, business and non-business have implications on how the VAT information is collated, calculated and submitted to HM Revenue & Customs. Setting this up correctly at the beginning is essential in getting this right.