VAT on School Fees - FAQs

VAT on School Fees - FAQs

The new Chancellor has confirmed that VAT will be applied to Independent School fees from 1st January 2025. This is a challenging time for all families with children in independent schools, so we thought it would be helpful to provide families with an FAQ (Frequently Asked Questions) document, which we will update regularly to ensure we keep everyone in our community fully up-to-date as things unfold more

What has the government decided?

The Treasury released a technical consultation, draft legislation, and explanatory notes on 29 July 2024. On the same day, the Chancellor announced the date of the Budget will be 30 October 2024. The papers confirm 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.

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.

The provision of nursery education whether at a standalone nursery or one attached to a private school will remain exempt.

VAT will therefore only apply from the Reception year of primary school.

What is Alleyn Court’s position in relation to this policy?

The school has put considerable thought into this situation, in the hope that prudent and timely action will mean less uncertainty for parents and children in the coming years. Matters which have been, and are currently being considered by the Governors, include:

It may be necessary in coming years to consider some areas of cost saving. This is standard practice in independent schools as a response to economic pressures which can impact the sector from time to time. We remain committed to managing costs and planning finances carefully to ensure that the outstanding provision for pupils at Alleyn Court remains affordable to our parents.

Some other schools must carry the continuing burden of significant rises in contributions to the national Teachers’ Pension Scheme. It is the case that Alleyn Court has already dealt with this issue, and it will not be a factor in our calculations in the coming years.

Alleyn Court remains a non-profit charity and will continue to ensure that any generated surpluses are always used to support the children’s’ experiences at Alleyn Court.

Will this have an impact on all part of school fees? is anything exempt?

Some closely related supplies of goods and services such as school meals, and packed lunches will remain exempt, and are not affected by the changes. However, if schools artificially attempt to ‘value shift’, i.e. artificially assign a greater value to these services and lower the amount charged for education and boarding, this will be challenged as VAT avoidance.

Before and after childcare, e.g. breakfast clubs or wrap around care that just consist of childcare will remain exempt as welfare.

Will VAT be charged where fees are paid by a third party, i.e. a grandparent or a trust?

Yes. The supply of education which is made to one person but paid for by another would still be treated as a supply to the actual recipient.

What measures will be taken to avoid any negative impact on the quality of education or staff, due to these financial challenges?

Alleyn Court has always been at the forefront of educational excellence in the region, providing our pupils with an outstanding academic experience, whilst also offering unmatched extracurricular opportunities and pastoral care. We are truly proud of what our pupils achieve and what our school enables.

We believe that we have also shown ourselves in recent times to be resilient, creative and flexible in how we manage our school. We were proud with how we navigated COVID, and we hope that our response to the pandemic proves our ability to progress and improve our provision even when facing challenges. In the coming years we will similarly continue to innovate; to build and to improve the wonderful experience for every child who attends Alleyn Court School.

What will the school do to reduce the fee increase when VAT is incurred?

The School will:

• Ensure VAT is charged at the correct rate and appropriately for different services i.e. food, wrap around care etc.

• Careful deployment of disbursements and discounts

• Continue to run budgets as efficiently as possible to keep the school running costs down, focusing on careful management of indirect costs.

• Consider other more significant cost savings and model the finances accordingly but recognising what parents value in independent education and be mindful of the areas best to target.

Why isn’t the school choosing to shield parents from some of the burden?

Simply put, the school is not in a position where it is currently able to absorb a portion of the tax burden.

The school remains a non-profit charity, led by a trustee body of volunteers.

Unlike other independent schools in the region, it does not have a large secondary school to financially strengthen it.

The school site, and assets, remain owned by private landlords to which the school remains a tenant.

The school maintains it position that the children are at the centre of all its developments.

Will consideration be given to the annual fee increase in light of the impact VAT will have on school fees?

The School will continue to monitor annual fee increases carefully and minimise annual fee increases alongside the impact of new VAT rules. Our aim is to keep fee increases to a minimum where possible. It is worth noting that across the independent sector, teachers’ and staff pay awards are dependent on fee increases alongside general increases in operational costs.

Will the terms of reference in my existing parent contact still be valid?

Yes

If VAT becomes chargeable and I can no longer afford the fees will FILON (fees in lieu of notice) still apply?

A term’s notice will still be required as per our parent contract, so we can budget accordingly. If you have changing circumstances or are facing difficulties, please communicate with the School as early as possible, as detailed below.

Who can i talk to at school if I want to discuss this further?

If you would like to talk about fees and your own circumstances, please firstly contact the Finance team via: [email protected]. Please note that the Finance team are not able to give independent financial advice, of course, but are happy to answer questions specific to Alleyn Court School fees.