What Parents Need to Know
The Government is moving ahead with its plan to introduce VAT on private school fees, which will take effect from 1 January 2025. This change was set out before the election, and the draft legislation, along with a technical note, was published on 29 July.
From January 2025, private schools will need to charge VAT at the standard rate of 20% for education services and vocational training. But that’s not all—if fees are paid on or after 29 July 2024 for a term starting on or after 1 January 2025, VAT will also apply.
What’s Included?
Private schools providing full-time education for children of compulsory school age, as well as sixth-form colleges, will be required to charge VAT. This will also apply to boarding services closely related to education and vocational training. The funds raised from this VAT charge will be used to support the state education sector.
However, nurseries remain unaffected by this change, whether they’re standalone or attached to a primary school. VAT will only be charged from the first year of primary education. Further education colleges and state schools are also outside the scope of this VAT charge.
Other Services and Extra-Curricular Activities
Private schools will also have to apply VAT to other services they provide, such as before and after-school education and extra-curricular activities, including arts and sports clubs. But there’s good news for parents using childcare-only services, such as holiday clubs or childcare before and after school with no educational element—these won’t attract VAT.
Pre-Payments and VAT
Some parents might be considering pre-paying their school fees to avoid the upcoming VAT charge. However, the Government has already thought ahead. If payments are made on or after 29 July 2024 for education services provided after 1 January 2025, they’ll be subject to VAT, regardless of when the payment is made. So, paying school fees in advance won’t help you avoid the charge.
The Government has also warned that they will challenge the validity of lump-sum payments made before this date that aren’t linked to specific school fees. They’ll be looking to collect VAT where they believe it’s owed.
VAT Registration for Private Schools
Private schools that aren’t already VAT-registered will be able to register from 30 October 2024 in preparation for these changes.
Got Questions About VAT on School Fees?
This change could mean a significant increase in costs for many parents. If you want to understand how these VAT changes might impact you or your business, or you need advice on tax planning, get in touch with Jon and the team today for expert guidance.
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