On 29 July 2024, the Chancellor announced that from 1 January 2025, all education services, vocational training and boarding services supplied by a private school, or a connected person, will be subject to VAT at the standard rate of 20%. What does this mean?
This is a freeview 'At a glance' guide to private school fees and VAT.
Note: this guide is based on draft legislation and guidance which may be subject to change.
At a glance
What is changing?
From 1 January 2025
- Legislation in Finance Bill 2024-25 will remove the VAT exemption on private school fees.
- All education services and vocational training supplied by private schools, and connected persons, will be subject to VAT at the Standard rate (20%) for school terms starting on or after 1 January 2025.
- Board and lodging services provided by a private school, or a connected person, will also be subject to VAT at 20% for school terms starting on or after 1 January 2025.
VAT will be due on the total received in return for providing education to the student. This may include the amount paid by the parent, as well as any external bursary that may be paid for the education of that student.
What is a private school?
For VAT purposes, a Private school is any school or institution that provides full-time education for a fee to either:
- Pupils of compulsory school age.
- 16 to 19 year olds, where that institution is wholly or mainly concerned with providing education suitable to that age range.
This includes private schools, independent schools and private sixth-form colleges.
Classes wholly, or almost wholly, for children under compulsory school age will be exempt from VAT. For example, a nursery class consisting of 90% or more children under compulsory school age will be exempt from VAT.
VAT registration
Private schools must Register for VAT where:
- Their total taxable turnover for the last 12 months is over £90,000.
- They expect their total taxable turnover to go over £90,000 in the next 30 days.
Education providers are able to register for VAT from 30 October 2024.
The exact date when individual private schools need to register for VAT will depend on:
- The value of school fee payments received for terms starting on or after 1 January 2025.
- The date payments are received.
If schools receive payments in advance they may need to register before 1 January 2025, depending on when payments are received.
HMRC have produced a tool to assist in checking when a school needs to register for VAT for private school fees.
VAT should not be charged or VAT invoices produced until a school has registered for VAT.
Transitional rules
Payments relating to school terms starting from 1 January 2025:
- Where, from 30 October 2024, a private school invoices or takes payment of fees in respect of terms which start on or after 1 January 2025, VAT will be due when the invoice or payment is taken.
- The standard VAT registration rules apply to these payments.
- Pre-payments of fees made from 29 July 2024 are subject to anti-forestalling provisions.
- If a private school invoices or takes payment on or after 29 July 2024, but before 30 October, and this relates to the school term starting on or after 1 January 2025, VAT will be due on the later of 1 January 2025 and the first day of the term.
Voluntary VAT registration
Education providers not:
- Already required to be VAT registered, but currently providing goods or services chargeable to VAT, can register for VAT voluntarily at any time.
- Currently providing goods or services chargeable to VAT can register for VAT from 30 October 2024 if they provide, or intend to provide, private education for terms starting on or after 1 January 2025.
What is not changing?
Some supplies will remain exempt from VAT. Examples include:
- Goods or services that are closely related to the supply of education. Examples might include sales of stationery to pupils to use in class, or school meals.
- Supplies of welfare services.
- Teaching English as a foreign language.
- Higher education courses.
Schools will need to critically analyse their income streams and consider whether they are making Single or multiple supplies as this may impact VAT classification. It is likely that many schools will be Partially exempt.
HMRC guidance
On 10 October 2024, HMRC published guidance explaining how some payments and situations relating to education will be treated for VAT.
This includes:
- Supplying education services that include other elements (such as school meals and transport) (single and multiple supplies).
- Supplying special educational needs and disabilities therapies and education.
- Supplying education and welfare services together.
- Receiving grant payments for education services.
- Bursary payments.
- Local authority placements in private schools.
- Application and registration fees paid during the application process.
- Other forms of payment.
- Activities of charities that run private schools.
- Supplies provided for the classroom.
- Nursery classes provided by private schools.
- Extra-curricular and before and after school clubs.
- VAT implications for fee-paying sixth forms and further education providers.
- Independent training providers.
- Non-maintained special schools.
- Teaching English as a foreign language.
- Higher education courses.
- Definition of board and lodging fees.
- Donations and voluntary contributions to private schools.
- Reclaiming VAT, including the Capital Goods Scheme and Partial Exemption.
Technical consultation
In July 2024, HM Treasury published a technical note on the changes, welcoming comments from interested stakeholders on the questions contained therein, and on the draft VAT legislation, to ensure it achieved the stated policy objectives. Responses were published in October 2024.
Following the consultation, a number of amendments were made to the draft legislation, including:
- Carving out:
- Higher Education taught at schools that are otherwise in scope of the policy.
- Independent Training Providers and Independent Learning Providers.
- Teaching English as a Foreign Language courses taught by private schools.
- Bringing Non-Maintained Special Schools within the scope of the policy for placements paid from 30 October 2024 relating to terms starting in January 2025 onwards.
- Ensuring that Further Education colleges remain exempt from VAT.
- Amending the definition of a nursery class to "a class that is composed wholly (or almost wholly) of children who are under compulsory school age or, in Scotland, school age, and would not be expected to attain that age while in that class".
See Government response: VAT and private school fees technical consultation
Small print & links
Useful guides on this topic
Education & VAT
What rate of VAT applies to education? What sort of services are classed as education? What do you do if you have multiple supplies including education? What cases are there on VAT and education?
Registering for VAT
When should a business register for and charge VAT? What are the VAT registration thresholds? What penalties might HMRC issue for late notification of registration? When do you need to file a VAT return?
Time of supply (Tax Point)
The time of supply of goods or services determines the date on which VAT becomes due. There are a number of different rules which must be considered.
Input VAT: What constitutes a valid claim (& VAT invoice)?
What is Input VAT? Who can claim it? What is needed for a valid claim? What needs to be included on a VAT invoice and can you make a claim without one?
External links
Policy paper: VAT on private school fees
VAT on Private School Fees & Removing the Charitable Rates Relief for Private Schools: technical note, government response, draft legislation and explanatory note
Check if you must register for VAT if you receive private school fees
Charging and reclaiming VAT on goods and services related to private school fees
