VAT on School Fees

On 29 July the Government confirmed that the legislation introducing VAT on school fees will be introduced in the Budget in respect of fees relating to periods commencing on 1 January 2025. Make sure that you’re best placed for the change by keeping up with the content below.

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Following the recent announcement by the Government to implement VAT on school fees from 1 January 2025, we are delighted to invite you to join Tracey Young, Partner and Head of Education, alongside Phil Salmon, Partner and Co-Head of VAT for an insight on the draft legislation and what your school should do now.

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Date: Wednesday 4 September 2024
Location: Online
Time: 15:30 – 17:00

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Impending changes

The Treasury has released a Technical Note and draft legislation which confirm that the legislation introducing VAT on school fees will apply from the date of the Budget and to VAT on school fees from 1 January 2025. In other words, whilst the legislation takes effect from 30 October 2024, it only applies to supplies made from 1 January 2025.

Anti-forestalling legislation applies to all payments made from 29 July 2024 in respect of supplies made from 1 January 2025. In other words, fees in advance payments made after 28 July 2024 are no longer effective in setting a tax point.

The papers also say that some Fees in Advance schemes may be challenged if HMRC consider they are ineffective in setting a tax point. The only detail they give is “the scheme involved paying a lump sum to the school in advance, but the details of the supplies that the money was not buying were not determined at the time the money was paid”, (i.e. if the money paid did not relate to specific terms’ fees that had already been set).

The papers confirm that VAT will also apply to boarding services and that both education and boarding services are caught if the supplies are made by a “connected person”.

Where pupils with special education needs (SEN) are placed in a private school, VAT will apply, but where they have been placed there under an EHCP funded by the Local Authority (LA), devolved government or non-departmental public body, then the LA will be able to reclaim the VAT.

Where pupils have an Education Health and Care Plan (EHCP) whose needs could be met in a state school, but whose parents have placed them in a private school out of choice, VAT will apply.

The change is being implemented by introducing an ‘exception’ to the VAT legislation which introduces a definition of ‘private school’ and removes it from the list of eligible bodies, thus preventing it from exempting its supplies.

Update: VAT on school fees

The papers confirm that the legislation introducing VAT on school fees will apply from the date of the Budget and to VAT on school fees from 1 January 2025. In other words, whilst the legislation takes effect from 30 October 2024, it only applies to supplies made from 1 January 2025. Anti-forestalling legislation applies to […]

VAT for Schools – Fees in Advance Schemes

But before sticking my head above the parapet, I will return to the first of these (to date) articles when I ventured into political punditry for the first time to speculate on how long schools might have to prepare for VAT on school fees and own up to losing the 50p bet I had on […]

VAT for Schools – the Capital Goods Scheme

What was being talked about was not some strange tax avoidance scheme or loophole in the VAT legislation. Nor, technically, is it retrospectively recovering VAT since its actually an adjustment to the VAT that was previously recoverable even if, in some cases, that initial deduction was nil. What was being talked about (for the most […]

VAT for Schools – The reality of VAT on school fees

As the clock ticks down to the likely introduction of VAT on school fees, high on the priority list has to be the question, “what do we do?” By that, I mean the nitty gritty questions such as: How do we become VAT registered if the School is not registered? How do we fill in […]

The clock is ticking – VAT on school fees

Until such time as legislation is published, any comments I do make are speculation, though after spending most of my working life as a VAT specialist, they are, I hope, informed speculation. How long will schools have to prepare? Let’s start with my first venture into political punditry as to how long schools might have […]

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