The following notes are copied from draft legislation published by HMRC, to be included in the Finance Bill 2024-25.
- As of 1 January 2025, all education services and vocational training supplied by a private school, or a “connected person”, for a charge will be subject to VAT at the standard rate of 20%. Boarding services closely related to such a supply will also be subject to VAT at 20%.
- Any fees paid from 29 July 2024 pertaining to the term starting in January 2025 onwards will be subject to VAT.
- Where pupils are placed in a private school because their needs cannot be met in the state sector, and they have their places funded by their Locally Authority (LA), a devolved government, or a nondepartmental public body, their funder will be compensated for the VAT they incur on these pupils’ fees.
- The government will legislate to remove eligibility of private schools in England to business rates charitable rates relief. However, the government recognises some pupils have special educational needs that can only be met in a private school. Therefore, the government will consider how to address the potential impact of these changes in cases where private school provision has been specified for pupils through an Education, Health and Care Plan (EHCP) – a plan given to children and young people who need more support than is available through special educational needs (SEN) support.
- The policy intention is for nurseries (both standalone nurseries and those attached to a private school) to remain exempt, and for the fees of children in the first year of primary school in a private school upwards to become taxable. This is the year in which children turn compulsory school age, often referred to as “reception” in England and Wales, “Primary 1” in Scotland, and “Year 1” in Northern Ireland.
- Education and vocational training provided either at sixth forms attached to private schools or standalone private sixth form colleges will also be subject to VAT. This is to ensure parity of tax treatment between further education supplied at sixth forms attached to private schools catering to children of compulsory school age (which are captured by the above definition of a private school), and those private sixth form colleges that only provide education to pupils aged 16-19. The legislation is also drafted in this way to ensure that private schools are not incentivised to artificially separate their sixth forms from the parts of their school catering to children of compulsory school age.
- Other “closely related” goods and services other than boarding (i.e. goods and services that are provided by a private school for the direct use of their pupils and that are necessary for delivering the education to their pupils) will remain exempt from VAT.
As set out in the draft legislation, “private schools” are defined as schools at which full-time education is provided for pupils of compulsory school age or, in Scotland, school age (whether or not such education is also provided for pupils under or over that age), or an institution at which full-time education is provided for persons over compulsory school age but under 19 and which is principally concerned with providing education suitable to the requirements of such persons (for example, a sixth form college), and where fees or other consideration are payable for that provision of full-time education.
Education and boarding provided by state schools (including academies) are not affected by this policy change, meaning they will continue to be exempt from VAT. This reflects the fact that state schools and academies will continue to be “eligible bodies”.