The Labour Party plans to remove the tax break for independt school fees (VAT exemption) as announced earlier. Here's what this means for parents:
When could this happen?
If Labour wins the next election (end of 2024 or early 2025), they could change the law quickly to tax independent school fees. This could be included in their first budget or done separately.
How would VAT affect bursaries and discounts?
Full bursaries: No VAT would be charged on free education.
Discounts: VAT would only apply to the amount actually paid, not the full fee.
Third-party payments (grandparents, trusts): Full fees would be subject to VAT even if paid by someone else.
What about overseas parents and advanced payments?
Overseas parents: They would still be charged VAT.
Advanced payments: This is a complex issue. In theory, fees paid before the law changes might not be subject to VAT. However, the new law could be applied retroactively or change the rules for future advance payments.
Is it possible to avoid VAT?
It's uncertain whether parents can avoid VAT through advance payments or other methods. While there are arguments against VAT applying to pre-paid fees, the government could change the rules or apply the tax retroactively.
What should parents do?
This is a developing situation. Parents considering independent schools should be aware of this potential change and its potential impact on costs. They may want to seek professional advice from a tax specialist.
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