Autumn Budget 2024: VAT on Private School fees clarifications and questions
30 Oct 2024 • Charity Tax • Education • VAT
VAT will be applied to Private School fees from 1 January 2025. While some clarification has been provided on the proposed draft legislation, questions remain such as the definition of “wholly or almost wholly” and what is a “closely related service”.
Following the Autumn Budget, we now have more clarity in respect of some areas of the application of VAT on fees for “Private Schools”. However, areas of uncertainty still remain. Further guidance would be beneficial, otherwise we could see schools requiring rulings from HMRC on a school-by-school basis, which is not ideal.
The key points learned from the Budget following the publication of a Technical Note (in response to the recent consultation) and the updated draft VAT legislation are summarised below.
What we know
The changes will be effective (for school terms) from the 1 January 2025, as expected, despite various calls for this to be delayed.
What’s changed? (since the publication of the draft legislation)
Further Education Colleges that are not wholly or mainly concerned with providing education suitable for 16-19 year olds, and where the majority of these pupils are not charged fees, don’t fall within the definition of a “Private School” and don’t have to charge VAT on their fees.
Higher Education providers such as Universities (as opposed to Art Schools) are going to be excluded from having to charge VAT (but it is not clear how the legislation reflects this).
The definition of nursery classes has been updated so that nursery fees for the whole class do not become subject to VAT as soon as one child reaches compulsory school age. As we reported in our last update, this was an area that required clarification, however, it may require further clarification as the new legislation refers to “wholly (or almost wholly)” in the new definition but with no explanation of how a class is considered to be “almost wholly” below compulsory school age. The technical note suggests this should be a majority, but a question remains, do they mean in terms of time, number, more than 50% of all pupils?