Private schools will need to register for VAT and charge output VAT on education and boarding services when the exemption that currently applies is removed from 1 January 2025.
All education and boarding services provided by a private school or connected person will be subject to VAT at the standard rate of 20%. Other closely related goods and services provided by a school, for example catering and school trips, will continue to be exempt if they are invoiced and paid for separately.
To prevent the avoidance of VAT by prepaying fees before the legislation change, anti-forestalling provisions were introduced from 29 July 2024, when the draft legislation was published. Any pre-payment of school fees made on or after that date but relating to the school term starting on or after 1 January 2025 will be subject to VAT at 20%. However, HM Treasury has warned that it will also be looking at fees paid before 29 July 2024 where the pre-payment does not identify the specific term and where the school may ask parents or guardians to top up the fees if there is a deficit in any year.
Private schools will have the opportunity to offset some of the additional cost against VAT paid on their inputs, such as capital expenditure and purchases of educational supplies. It will be a commercial decision for the individual school whether to pass this saving on to parents.
Where pupils with special educational needs and disabilities (SEND) have an educational health and care plan (EHCP) that requires a local authority (LA) to fund their private school fees, the LA will be able to recover the VAT. Where parents or carers choose to send their child with SEND to a private school but there is not an EHCP in place that requires it, the fees will not be exempt from VAT.
Schools will need to register for VAT and comply with the requirements of Making Tax Digital for VAT by 1 January 2025. We can help you with this. Please contact our expert Ruth Corkin below on +441908713860 or ruth.corkin@hhllp.co.uk
