Legal News | 1.08.24
School’s out for summer, but VAT’s in for 2025
The government’s plans have now been confirmed. As from 1 January 2025, all education services and vocational training services supplied by private schools will be subject to 20% VAT.
The VAT charge is in relation to these services (education and vocational training). Goods and services that are provided by a private school for the direct use of their pupils, and are necessary for delivering education to the pupils, remain VAT exempt and so this will cover meals, transport, books and stationery. HMRC will, we are told, challenge any attempts to artificially assign greater value to these goods and services that remain VAT exempt.
The legislation will include retrospective impact so that any fees paid from 29 July 2024 relating to a term starting from January 2025 onwards will be subject to VAT. HMRC will, we are told, be carefully scrutinising schemes that have been in place enabling parents to pre-pay private school fees in an attempt to avoid the VAT charge.
Private schools with charitable status will no longer be eligible for business rates charities relief and will therefore need to pay their full business rates liability. Around half the private schools in England have charitable status.
Nursery school fees (including those attached to a private school) remain VAT exempt, it is fees from Reception year onwards that become VATable.
If the likely consequent increase in school fees is concerning members of your family and you want to offer financial assistance, do read our previous letter with tax efficient ideas: Helping AggraVATed Parents – Wansbroughs LLP.
