Private school pupils could be forced to drop out part-way through the academic year thanks to Labour slapping VAT on fees from January, experts warned.
Families have been told they face ‘great disruption’ following the new Government’s announcement this week that, effective from the start of 2025, an extra 20 per cent levy will be added to fees.
Parents will likely have to find thousands of pounds extra a year on top of school fees, raising concerns about whether already stretched households will be able to afford it.
Rudolf Eliott Lockhart, chief executive of the Independent Schools Association, told the Mail: ‘The implementation of adding VAT to school fees being brought forward to January will bring great disruption to families who have already chosen schools for their children for the coming school year.
‘Parents may be forced to move their children to a different school halfway through the academic year.’
Private school pupils could be forced to drop out part-way through the academic year thanks to Labour slapping VAT on fees from January, experts warned (stock)
Families have been told they face ‘great disruption’ following the new Government’s announcement this week that, effective from the start of 2025, an extra 20 per cent levy will be added to fees (stock)
Fees at private schools – averaging around £15,000 a year – are currently VAT-free because they are deemed regulated education providers and so do not have to pay it.
Any extra-curricular or out-of-term time lessons, such as dance classes and football training which cost money not included in the tuition fees, will also be subject to new VAT rules.
The Government said pupils in special schools whose place is funded by the local authority rather than a carer or a parent will be charged the extra – but will have the money reimbursed.
Mr Eliott Lockhart [corr] said: ‘Although the Government has initiated discussions with the sector, these talks began after the policy’s effective date was announced, resulting in many unanswered questions.
‘Small and financially fragile schools offering a specialist provision that isn’t found in the state sector will be hit hardest by this new policy.
‘It could disproportionately harm SEND (special educational needs and disability) schools, bilingual schools, performing arts schools, and schools for pupils from specific religious communities.
‘ISA remains keen to work with the Government to ensure there aren’t unintended consequences that might harm the education landscape.’
Ms Reeves also announced immediate action to prevent the ‘pre-payment’ of fees by parents as a means of getting around the 20 per cent hike
It came as parents were warned those who have sought to avoid the uplift by paying fees early being taxed.
The Government said it was aware of some parents taking advantage of repayment options in private schools ‘in an attempt to avoid these fees being subject to VAT’.
But it said HM Revenue and Customs ‘stands ready to challenge the validity of such payments and will seek to collect VAT on those fees where it is due’.
David Gage, head of VAT at financial advisers Old Mill, said parents who have made ‘woolly’ prepayments for months ahead are now at risk of being pursued by HMRC for ‘VAT avoidance’.
He said: ‘We knew VAT would be added to private school fees – however, we did not anticipate that the Government would be so quick to bring prepaid fees into this new VAT regime too.
‘If parents pre-pay school fees, they should be subject to VAT if they relate to private school education which will be provided on or after January 1 2025.
‘If a parent has effectively just handed over a pot of money – that could in theory be used to cover as-yet-undefined future fees – then this is open to challenge.
‘So in effect, if the payment is woolly – and no invoice has been issued – it does not relate to a specific future term, because the school has yet to set actual fees, then it will likely be pursued as VAT avoidance by HMRC.’
