News
The Government to remove exemption of VAT on private school fees
The Government has confirmed that from 1st January 2025, VAT will apply to private school fees and boarding fees, including the pre-payment of fees.
By Catherine Heinen, FCCAA technical note from the Government explains that “ending tax breaks for private schools will help to raise revenue to fund state education”.
Parents may have pre-paid private school fees in the hope of paying lower fees before the introduction of the VAT charge. Government documentation confirms the introduction of anti-forestalling measures and any fees paid from 29th July 2024 that relate to a term starting in January 2025 or after will be subject to VAT. This does mean that those schools and parents who have already received and made early payments will not be caught by the changes and no VAT is payable on those fees.
The Government’s technical note states: “As of 1st 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 and lodging services closely related to such a supply will also be subject to VAT at 20%.”
Other services
Fees charged by private schools that are not for educational services, vocational training and boarding and lodging services closely related to these supplies will now be chargeable to VAT. Other services provided by private schools previously exempt for VAT will continue to be exempt.
Private school placement due to pupils needs
Pupils may be placed in a private school because their needs can’t be met in the state sector and have their places funded by the Local Authority, devolved government, or non-departmental public body. In these circumstances, the funder will be compensated for the VAT incurred.
Business rates charitable rates relief.
Approximately 50% of private schools in England are registered charities. Where a school in England has charitable status, it is currently eligible for rates relief of 80%. Local authorities can provide further relief at their discretion.
The Government will remove eligibility of private schools in England to business rates charitable rates relief. The Government will consider how to address the impact of the changes where pupils are placed in a private school as a state school can’t meet their needs.
Business rates in Scotland, Wales and Northern Ireland are devolved. This means these changes will apply in England only.
The business rates changes are intended to take effect from April 2025.
Date published 31 Jul 2024
Catherine Heinen, FCCA
Catherine is a Technical Content Writer at TaxAssist Accountants, and a qualified accountant. With experience working at two accountancy practices in the UK top 50 accountancy firms according to Accountancy Age, Catherine has significant experience in accounts, tax returns and advising clients. Catherine ensures businesses, business owners and individuals are kept up to date and informed by providing concise and informative technical material.
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