On 29 July 2024, the UK government announced a draft legislation on removing private school’s VAT exemption status, alongside business rates, effective in January 2025. This means independent schools will be paying VAT at a standard rate for education and related services.
Further changes are to be anticipated in the upcoming Autumn Budget on 30 October. Currently, the draft legislation confirms that the following fees and services will now be liable to VAT:
- Education fees
- Vocational training fees
- Lodging and boarding fees for private schools
Certain supplies and services remain VAT-exempt, including pupil transport services, school meals and catering, examination fees, and more. Grey areas surround which fees remain exempt. VAT relief or partial exemptions may be available in bursaries or scholarships.
As the government finalises the new rules, both schools and parents are urged to prepare for the potential financial impact. Whilst not all schools will increase fees by a full 20%, parents should expect adjustments to cover the additional costs.
Anti-forestalling measures are also introduced to prevent tax avoidance among parents or guardians. Advanced school fee payments from 29 July 2024 may be considered tax triggers and will be treated VAT-able.
As the UK moves towards implementing VAT on private school fees, both schools and parents face new financial and administrative challenges. It is essential for all parties to stay informed, seek professional advice, and prepare for the changes to ensure smooth compliance and financial planning ahead of January 2025.
Whether the draft legislation will be pushed or not, stay updated about the upcoming changes here at Legend Financial.
