| VAT on Private School 14:06 - Jun 13 with 29382 views | mutters |
Whilst it does seem like the correct thing to do (why are they granted VAT free / Charity status in the first place?), how on earth will the system cope if there is a mass migration to the state sector? We are already short of school places and also decent ones as well. |  |
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| VAT on Private School on 16:21 - Jun 15 with 3059 views | Crawfordsboot |
| VAT on Private School on 11:43 - Jun 15 by redrickstuhaart |
That is what VAT is.... Not a sound argument. Unless you say that vat on a car is also bad because I have already paid tax on the earnings I use to buy it. |
Not sure what your point is.
I wasn’t looking to make a point - just explain the current situation.which is that independent schools already pay VAT on their inputs and that it is not recoverable.
State schools also pay VAT on their inputs but they then get it back via the local authority.
I suspect that the majority fail to understand that this has been the case for years! |  | | |
| VAT on Private School on 19:48 - Jun 15 with 2943 views | mutters |
| VAT on Private School on 12:22 - Jun 15 by Jack27 |
Genuine question to everyone - if you could afford to send your child(ren) to a private school, would you? Or even if you could afford it would you still use the state system? |
Absolutely if it offered my child a better path. As much as I would love all the local state schools to offer the same education, some schools achieve a lot more. Thomas Mills in Suffolk for example is an excellent state school, with facilities akin to some private schools. However, the two schools in Felixstowe (before they built the new one) were truly awful, sink schools, not a lot of support and low outcomes. They knocked those schools down, and built one big cr@p school. In that scenario, I would do all I could to not let my kid go to that school and put them private.
I admire those who would take a stand and say state school without fail, but ultimately I would do what I could for my daughter. If my option was a cr@p secondary school or private (and I could afford it), it would be private every time. | |
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| VAT on Private School on 22:37 - Jun 15 with 2872 views | crouchendyachtclub |
| VAT on Private School on 16:21 - Jun 15 by Crawfordsboot |
Not sure what your point is.
I wasn’t looking to make a point - just explain the current situation.which is that independent schools already pay VAT on their inputs and that it is not recoverable.
State schools also pay VAT on their inputs but they then get it back via the local authority.
I suspect that the majority fail to understand that this has been the case for years! |
Surely those inputs as a proportion of costs are going to be minimal though. Schools are service industries and as a rule tend to custom built so unlikely to be paying rent. They probably only have 10% max of their costs that are vattable and even then some of them will be zero rated or at a lower rate. |  | | |
| VAT on Private School on 23:56 - Jun 15 with 2829 views | reusersfreekicks |
| VAT on Private School on 13:04 - Jun 15 by DJR |
I could have done but, as a matter of principle, never ever contemplated that route (despite offers of help from my parents) because I dislike the inequality that private schools have embedded in our society for centuries. [Post edited 15 Jun 2024 13:13]
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Same |  | | |
| VAT on Private School on 04:12 - Jun 16 with 2792 views | little_boy_blue |
Where we live all our secondary schools were not great. We sent our children to private school and it was a real struggle. I worked long hours and 7 days a week to do this. Adding VAT would have made it even harder. I know for some of the parents adding VAT would have a drop in the ocean but for others it will be the difference between sending them or not. The people that would suffer are probably those that work hard and are already paying a lot in tax. There are much better ways to increase tax income. | | | |
| VAT on Private School on 08:00 - Jun 16 with 2739 views | Crawfordsboot |
| VAT on Private School on 22:37 - Jun 15 by crouchendyachtclub |
Surely those inputs as a proportion of costs are going to be minimal though. Schools are service industries and as a rule tend to custom built so unlikely to be paying rent. They probably only have 10% max of their costs that are vattable and even then some of them will be zero rated or at a lower rate. |
Yes - you are correct in principle but the figure is more like 20% of costs. Factor in various exemption adjustments and the net impact of making education vatable at 20% is estimated to be 15 or 16% additional costs.
For many years independent Schools have, in response to the questioning of their Charitable Status, increased spending on bursaries. Unlike a well endowed Eton or Harrow the majority of Independent Schools fund the awards from fee income, I.e existing parents pay the bursary awards for poorer kids. The level of awards averages around 12% of fee income.
It’s easy enough to see that applying VAT on fees resulting in a net 15 or 16% cost increase schools will look to mitigate that increase and the obvious place to start would be to stop or reduce charitable bursary awards. In addition they would have no incentive to pursue other charitable actions like making their facilities, swimming pools, sports facilities, music halls, theatres etc available to local communities.
In other words the application of VAT might make good headlines, and would make some people feel better, but would ultimately lead to the cancelling out of a lot of the good that these schools do. Not to mention the soft power the country has from educating the children of many of the worlds leaders.
On the other hand there is an argument to be made about the merits of having a single system of education where privileged and articulate parents are engaged and therefore argue in support of better education for everyone. At the moments their support is missing. | | | |
| VAT on Private School on 08:55 - Jun 16 with 2695 views | crouchendyachtclub |
| VAT on Private School on 08:00 - Jun 16 by Crawfordsboot |
Yes - you are correct in principle but the figure is more like 20% of costs. Factor in various exemption adjustments and the net impact of making education vatable at 20% is estimated to be 15 or 16% additional costs.
For many years independent Schools have, in response to the questioning of their Charitable Status, increased spending on bursaries. Unlike a well endowed Eton or Harrow the majority of Independent Schools fund the awards from fee income, I.e existing parents pay the bursary awards for poorer kids. The level of awards averages around 12% of fee income.
It’s easy enough to see that applying VAT on fees resulting in a net 15 or 16% cost increase schools will look to mitigate that increase and the obvious place to start would be to stop or reduce charitable bursary awards. In addition they would have no incentive to pursue other charitable actions like making their facilities, swimming pools, sports facilities, music halls, theatres etc available to local communities.
In other words the application of VAT might make good headlines, and would make some people feel better, but would ultimately lead to the cancelling out of a lot of the good that these schools do. Not to mention the soft power the country has from educating the children of many of the worlds leaders.
On the other hand there is an argument to be made about the merits of having a single system of education where privileged and articulate parents are engaged and therefore argue in support of better education for everyone. At the moments their support is missing. |
I work in finance in a service industry, while our overhead is 20% that includes rent and support salaries so your 20% still seems high to me.
The rest doesn’t really make sense either, vat is a pass through. The only variable in the bottom line is the students that no longer attend, your contention seems to have flipped from private schools currently pay vat that would suddenly become recoverable (at your estimate 3%) to private schools will suddenly be subject to a 15% increase in costs and I can’t really see where that is coming from. | | | |
| VAT on Private School on 10:31 - Jun 16 with 2627 views | DJR |
| VAT on Private School on 08:00 - Jun 16 by Crawfordsboot |
Yes - you are correct in principle but the figure is more like 20% of costs. Factor in various exemption adjustments and the net impact of making education vatable at 20% is estimated to be 15 or 16% additional costs.
For many years independent Schools have, in response to the questioning of their Charitable Status, increased spending on bursaries. Unlike a well endowed Eton or Harrow the majority of Independent Schools fund the awards from fee income, I.e existing parents pay the bursary awards for poorer kids. The level of awards averages around 12% of fee income.
It’s easy enough to see that applying VAT on fees resulting in a net 15 or 16% cost increase schools will look to mitigate that increase and the obvious place to start would be to stop or reduce charitable bursary awards. In addition they would have no incentive to pursue other charitable actions like making their facilities, swimming pools, sports facilities, music halls, theatres etc available to local communities.
In other words the application of VAT might make good headlines, and would make some people feel better, but would ultimately lead to the cancelling out of a lot of the good that these schools do. Not to mention the soft power the country has from educating the children of many of the worlds leaders.
On the other hand there is an argument to be made about the merits of having a single system of education where privileged and articulate parents are engaged and therefore argue in support of better education for everyone. At the moments their support is missing. |
The point I made above about setting off inputs, is probably made better by the following from the accountingweb website.
"Whatever the price of the fees, it’ll cost 20% more for those who are not swayed by a VAT increase. However, the actual increase may not technically be a full 20% for parents. Schools can now reclaim some input tax on overheads and property maintenance, potentially off-setting a lower cost base against a slightly higher term fee." |  | | |
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| VAT on Private School on 11:29 - Jun 16 with 2579 views | Crawfordsboot |
| VAT on Private School on 10:31 - Jun 16 by DJR |
The point I made above about setting off inputs, is probably made better by the following from the accountingweb website.
"Whatever the price of the fees, it’ll cost 20% more for those who are not swayed by a VAT increase. However, the actual increase may not technically be a full 20% for parents. Schools can now reclaim some input tax on overheads and property maintenance, potentially off-setting a lower cost base against a slightly higher term fee." |
I note your background in a service industry. For my part I’m a qualified CA having worked in the independent school sector for over twenty years with direct responsibility for the finances of 15 schools (mostly boarding). I stick by my estimate of 20% of costs currently subject to non recoverable VAT.
However you look at it the additional net VAT cost that schools will have to pass on to parents and/or mitigate by other steps will be the 20% VAT on fees less the previously irrecoverable VAT on inputs. A number of research papers estimate this to be around 15%.
This does not include capital goods scheme under which VAT on new buildings constructed in the last 10 years could become deductable. [I ignored this as a complication too far for this site]
My other points about the steps schools would likely take to reduce costs around other charitable services remain valid.
Just to clarify: I accept that VAT is almost certainly going to be applied. It is too much of a political issue to not do so. I just don’t think that the financial consequences have been properly thought through. A number of independent schools will disappear but many will survive. This will do little or nothing to bring the strength and qualities of the independent sector into general public good. Rather it will drive the private and the state sector further apart, even more so if the independent sector loses Charitable Status. | | | |
| VAT on Private School on 11:32 - Jun 16 with 2568 views | DJR |
| VAT on Private School on 11:29 - Jun 16 by Crawfordsboot |
I note your background in a service industry. For my part I’m a qualified CA having worked in the independent school sector for over twenty years with direct responsibility for the finances of 15 schools (mostly boarding). I stick by my estimate of 20% of costs currently subject to non recoverable VAT.
However you look at it the additional net VAT cost that schools will have to pass on to parents and/or mitigate by other steps will be the 20% VAT on fees less the previously irrecoverable VAT on inputs. A number of research papers estimate this to be around 15%.
This does not include capital goods scheme under which VAT on new buildings constructed in the last 10 years could become deductable. [I ignored this as a complication too far for this site]
My other points about the steps schools would likely take to reduce costs around other charitable services remain valid.
Just to clarify: I accept that VAT is almost certainly going to be applied. It is too much of a political issue to not do so. I just don’t think that the financial consequences have been properly thought through. A number of independent schools will disappear but many will survive. This will do little or nothing to bring the strength and qualities of the independent sector into general public good. Rather it will drive the private and the state sector further apart, even more so if the independent sector loses Charitable Status. |
Sorry, it wasn't me who has a background in a service industry. I was just saying the increase in fees may not be 20% because of the setting off of inputs.
As you may have seen from my earlier posts, I have indicated some drawbacks about the proposals, including mentioning a recent influx of pupils into my daughter's state primary school.
In any event, as I have said, it looks like the proposal won't come into force until September 2026 at the earliest, and I could see further delays or watering down, when a proper analysis by civil servants of the consequences of the provisions takes place. [Post edited 16 Jun 2024 16:02]
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| VAT on Private School on 11:50 - Jun 16 with 2547 views | Crawfordsboot |
| VAT on Private School on 15:56 - Jun 13 by grow_our_own |
"mass migration to the state sector"..."huge amount of pressure on the state system"
554k kids go to private school in the UK (~6% of pupils). If say 10% can no longer afford it, that's 55k. There are 24k non-private schools in the UK. That's just over two kids per school. No mass migration, no huge pressure. Don't believe everything the ISC (private school lobby) and the right-wing press say.
What's more of a scandal is why these private companies (in all but name) still won't pay corporation tax, capital gains tax, and business rates. They aren't a public good, and contribute to us being near bottom of international social-mobility rankings. I'm not in favour of banning them like some countries do, as that's illiberal, but let's tax them properly like the private enterprises they are and pump that money into the state sector and levelling life chances. [Post edited 13 Jun 2024 16:05]
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I fear that you are not aware of the fact that though there are a few privately owned independent schools far and away the vast majority are registered charities operating on a not for profit basis.
They are run by Trustee Governors who are unpaid. Charity law prohibits Trustees being paid and there are no shareholders to receive dividends.
The schools are operated on the basis that fee income goes back into the schools. So good luck with the idea of applying income tax and capital gains tax so as to invest in the state sector.
As for our social mobility ratings being held down by independent schools I think you should look more to the Royal Family, Church and their hangers on for that.
The points you make appear to be driven by prejudice rather than considered facts.
I do though agree that there are no justifiable grounds for allowing them rates relief. | | | |
| VAT on Private School on 14:45 - Jun 16 with 2478 views | grow_our_own |
| VAT on Private School on 11:50 - Jun 16 by Crawfordsboot |
I fear that you are not aware of the fact that though there are a few privately owned independent schools far and away the vast majority are registered charities operating on a not for profit basis.
They are run by Trustee Governors who are unpaid. Charity law prohibits Trustees being paid and there are no shareholders to receive dividends.
The schools are operated on the basis that fee income goes back into the schools. So good luck with the idea of applying income tax and capital gains tax so as to invest in the state sector.
As for our social mobility ratings being held down by independent schools I think you should look more to the Royal Family, Church and their hangers on for that.
The points you make appear to be driven by prejudice rather than considered facts.
I do though agree that there are no justifiable grounds for allowing them rates relief. |
Most of that is ISC propaganda. Its common for "unpaid" trustees and governors to also be relatively well paid employees (teachers, administrators, etc). These people are paid, just while wearing a different cap for PR purposes. Plus trustees and governors still receive "expenses".
Charities have some semblance they're serving the public good. Private schools are the opposite. They contribute to us being near bottom of international social-mobility rankings. They should not be untaxed "charities", no matter how they arrange their accounts ("not for profit"), nor how the owners are labelling themselves at the time they're paid. They're private enterprises who have paying customers who receive a service: education. Absolutely, we should tax them properly: corporation tax and capital gains tax in addition to VAT and business rates (I was wrong earlier, Labour will in fact introduce BRs, not just VAT).
Agreed about the other reasons we've poor social mobility. But that's weak whataboutery. No attempt to improve civilisation should be made that affects you until all other improvements are implemented first? [Post edited 16 Jun 2024 16:55]
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| VAT on Private School on 16:38 - Jun 16 with 2403 views | bluestandard |
| VAT on Private School on 19:23 - Jun 13 by Mullet |
It’s a terrible argument though as private school is a choice. Same as healthcare.
All of it should pay its way or go bust. |
Interesting example, given care fees are zero rates. Shall we add VAT to care fees then?
Imo, people quoting the need for ‘fairness’ in the tax system are missing the point, as there isn’t really an objective fairness in taxation. Taxes are levied in some areas and not in others, often to try and encourage certain behaviour. This move by Keir Starmer is influencing an exodus from the private sector. You might agree with that aim, but don’t call it fairness please. And again imo if you want to encourage that, it’s smacks of envy. | | | |
| VAT on Private School on 16:52 - Jun 16 with 2373 views | redrickstuhaart |
| VAT on Private School on 16:38 - Jun 16 by bluestandard |
Interesting example, given care fees are zero rates. Shall we add VAT to care fees then?
Imo, people quoting the need for ‘fairness’ in the tax system are missing the point, as there isn’t really an objective fairness in taxation. Taxes are levied in some areas and not in others, often to try and encourage certain behaviour. This move by Keir Starmer is influencing an exodus from the private sector. You might agree with that aim, but don’t call it fairness please. And again imo if you want to encourage that, it’s smacks of envy. |
Of course its fairness. Why should a commercial or quasi commercial enterprise enjoy tax breaks, funded by the rest of us, so that people who are already relatively wealthy can enjoy a significant advantage for their children more cheaply? | | | |
| VAT on Private School on 17:00 - Jun 16 with 2360 views | Crawfordsboot |
| VAT on Private School on 14:45 - Jun 16 by grow_our_own |
Most of that is ISC propaganda. Its common for "unpaid" trustees and governors to also be relatively well paid employees (teachers, administrators, etc). These people are paid, just while wearing a different cap for PR purposes. Plus trustees and governors still receive "expenses".
Charities have some semblance they're serving the public good. Private schools are the opposite. They contribute to us being near bottom of international social-mobility rankings. They should not be untaxed "charities", no matter how they arrange their accounts ("not for profit"), nor how the owners are labelling themselves at the time they're paid. They're private enterprises who have paying customers who receive a service: education. Absolutely, we should tax them properly: corporation tax and capital gains tax in addition to VAT and business rates (I was wrong earlier, Labour will in fact introduce BRs, not just VAT).
Agreed about the other reasons we've poor social mobility. But that's weak whataboutery. No attempt to improve civilisation should be made that affects you until all other improvements are implemented first? [Post edited 16 Jun 2024 16:55]
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Stop digging - you are demonstrating your prejudice and ignorance.
Charity law requires that charity employees, in this case teachers and administrators, are barred from serving as Trustees of the employing charity. But hey don’t let facts of the prevailing law get in the way of your rant.
There is a perfectly rationale argument to be made in support of social equity in education but your rant rather undermines you. | | | |
| VAT on Private School on 17:16 - Jun 16 with 2326 views | bluelagos |
| VAT on Private School on 17:00 - Jun 16 by Crawfordsboot |
Stop digging - you are demonstrating your prejudice and ignorance.
Charity law requires that charity employees, in this case teachers and administrators, are barred from serving as Trustees of the employing charity. But hey don’t let facts of the prevailing law get in the way of your rant.
There is a perfectly rationale argument to be made in support of social equity in education but your rant rather undermines you. |
I have a solution that would raise much needed money for the state schools and leave fees where they are and so not upset parents paying fees, and addreess the unfairness of privately educated pupils in the workplace compared to those from state schools.
An extra 5p income tax on all privately educated workers. I wont propose backdating it as I am not unreasonable :-) |  |
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| VAT on Private School on 17:24 - Jun 16 with 2298 views | Nthsuffolkblue |
| VAT on Private School on 19:48 - Jun 15 by mutters |
Absolutely if it offered my child a better path. As much as I would love all the local state schools to offer the same education, some schools achieve a lot more. Thomas Mills in Suffolk for example is an excellent state school, with facilities akin to some private schools. However, the two schools in Felixstowe (before they built the new one) were truly awful, sink schools, not a lot of support and low outcomes. They knocked those schools down, and built one big cr@p school. In that scenario, I would do all I could to not let my kid go to that school and put them private.
I admire those who would take a stand and say state school without fail, but ultimately I would do what I could for my daughter. If my option was a cr@p secondary school or private (and I could afford it), it would be private every time. |
That situation is not a purely private vs state argument.
Those who are rich enough choose to live in catchment areas that give access to better schools. There is competition within the state sector and the rich benefit to the detriment of the poor. |  |
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| VAT on Private School on 17:49 - Jun 16 with 2273 views | Crawfordsboot |
| VAT on Private School on 17:16 - Jun 16 by bluelagos |
I have a solution that would raise much needed money for the state schools and leave fees where they are and so not upset parents paying fees, and addreess the unfairness of privately educated pupils in the workplace compared to those from state schools.
An extra 5p income tax on all privately educated workers. I wont propose backdating it as I am not unreasonable :-) |
Nice one Lagos 😂
As an alumni of Saxmundham Secondary Modern I wouldn’t object. We do though have a mutual acquaintance who might be a bit agrieved.
Perhaps a better idea would instead be to levy the tax on teachers trained at great cost to the taxpayer only for them to abandon the profession. :) | | | |
| VAT on Private School on 18:05 - Jun 16 with 2230 views | bluestandard |
| VAT on Private School on 16:52 - Jun 16 by redrickstuhaart |
Of course its fairness. Why should a commercial or quasi commercial enterprise enjoy tax breaks, funded by the rest of us, so that people who are already relatively wealthy can enjoy a significant advantage for their children more cheaply? |
Let’s unpick. Firstly, this isn’t extra money going into the pockets of private schools. VAT is charged and then handed over the HMRC. Secondly, I could give you plenty of examples of what you describe. In fact I already did……care fees. You haven’t really addressed my point that there is no OBJECTIVE measure of fairness in taxation. You’re just giving your opinion and mine is different. Agree to disagree? | | | |
| VAT on Private School on 18:12 - Jun 16 with 2199 views | redrickstuhaart |
| VAT on Private School on 18:05 - Jun 16 by bluestandard |
Let’s unpick. Firstly, this isn’t extra money going into the pockets of private schools. VAT is charged and then handed over the HMRC. Secondly, I could give you plenty of examples of what you describe. In fact I already did……care fees. You haven’t really addressed my point that there is no OBJECTIVE measure of fairness in taxation. You’re just giving your opinion and mine is different. Agree to disagree? |
I know what it is and I understand vat. Who said anything about money going to private schools? (albeit you watch them put up the fees by the full 20% whilst enjoy the ability to recover some of it that they did not recover before). Care fees are not the same thing. Private school is a luxury choice. Care fees very rarely are.
You pay vat on a luxury service or item (and indeed many non luxury items). If you get a special break on the luxury of private schools, that is at the expense of others. | | | |
| VAT on Private School on 18:26 - Jun 16 with 2178 views | grow_our_own |
| VAT on Private School on 17:00 - Jun 16 by Crawfordsboot |
Stop digging - you are demonstrating your prejudice and ignorance.
Charity law requires that charity employees, in this case teachers and administrators, are barred from serving as Trustees of the employing charity. But hey don’t let facts of the prevailing law get in the way of your rant.
There is a perfectly rationale argument to be made in support of social equity in education but your rant rather undermines you. |
"Charity law requires that charity employees, in this case teachers and administrators, are barred from serving as Trustees of the employing charity. " - lol. No it doesn't. Did the ISC tell you that? I won't wait for a citation, because you won't find a reputable one.
I think you've taken a nugget of truth: that trustee vs employee conflicts of interest must be must be avoided, eg trustee deciding on their own income as an employee, and spouted nonsense in favour of your argument. Nothing stopping someone serving as both.
Private schools aren't charities. This is true in every sense except the letter of the current law. Hopefully that will change shortly. The tide is finally turning. [Post edited 16 Jun 2024 18:28]
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| VAT on Private School on 19:01 - Jun 16 with 2133 views | Crawfordsboot |
| VAT on Private School on 18:26 - Jun 16 by grow_our_own |
"Charity law requires that charity employees, in this case teachers and administrators, are barred from serving as Trustees of the employing charity. " - lol. No it doesn't. Did the ISC tell you that? I won't wait for a citation, because you won't find a reputable one.
I think you've taken a nugget of truth: that trustee vs employee conflicts of interest must be must be avoided, eg trustee deciding on their own income as an employee, and spouted nonsense in favour of your argument. Nothing stopping someone serving as both.
Private schools aren't charities. This is true in every sense except the letter of the current law. Hopefully that will change shortly. The tide is finally turning. [Post edited 16 Jun 2024 18:28]
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https://www.bedfordgirlsschool.co.uk/userfiles/bgsv2mvc/documents/Connected%20Co
Section 1.14 | | | |
| VAT on Private School on 19:07 - Jun 16 with 2126 views | redrickstuhaart |
You know that internal rules are not the law? | | | |
| VAT on Private School on 19:34 - Jun 16 with 2098 views | Crawfordsboot |
| VAT on Private School on 19:07 - Jun 16 by redrickstuhaart |
You know that internal rules are not the law? |
Apologies you are right. I see that things have changed since I was last involved with the sector.
In practice I encountered a great many independent School Governing Bodies but not once did I find one that had employees as Governors. I see that current legislation does not ban it as such. I overstated my case. | | | |
| VAT on Private School on 19:54 - Jun 16 with 2090 views | Swansea_Blue |
| VAT on Private School on 12:22 - Jun 15 by Jack27 |
Genuine question to everyone - if you could afford to send your child(ren) to a private school, would you? Or even if you could afford it would you still use the state system? |
Nope, we wouldn’t even consider it as it goes against everything we believe, which is opportunity for education for all irrespective of the ability to pay. Our kids are bilingual and go to a Welsh school too, so I’m not sure if that’s also a factor (I’ve no idea if there are Welsh language private schools). The state schools around us seem perfectly good enough. |  |
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