The government has published its Technical Note outlining the 20% VAT charge to private school fees across the UK, as well as removing the business rates charitable rates relief for private schools in England. Draft legislation accompanies the Note.

The key takeaways from a VAT perspective:

• Any school fees paid from 29 July 2024 pertaining to the term starting in January 2025 onwards will be subject to VAT at 20%.
• Boarding and lodging related to education services at private schools will also be subject to 20% VAT.
• The VAT treatment of any before/after school childcare, extra-curricular clubs, or childcare-based holiday clubs that are not educational in nature will not be affected by this policy change.
• The government is committed to ensuring that pupils with the most acute Special Educational Needs (SEN) are not impacted by this policy.
• The policy intention is for nurseries (both standalone nurseries and those attached to a private school) to remain exempt.

It is acknowledged in the Technical Note that a number of parents have taken the opportunity to pre-pay school fees prior to 29 July, anticipating that the government would make this change. Schools offering parents the option to pre-pay fees will have done so with caution - the government is clear that HMRC stands ready to challenge the validity of such payments and will seek to collect VAT on those fees where it is due.

It remains to be seen whether the intended impact of this policy - having more money to spend on the state sector - will have the desired effect. A lot of the proposed investment is going to take time, but there could be a more immediate impact on resources if children who are currently in private school have to be moved into the state sector. There are also wider impacts such as inflated house prices in key catchment areas which the government may not have thought through properly.

VAT on Private School Fees & Removing the Charitable Rates Relief for Private Schools - GOV.UK (www.gov.uk)