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 30 October 2024:
- 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.
- Boarding 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 primarily concerned with providing education suitable to that age range.
This includes private schools, further education colleges, independent schools and sixth-form colleges.
Classes for children under compulsory school age will be exempt from VAT (e.g. nurseries).
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 will be 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.
VAT should not be charged or VAT invoices produced until a school has registered for VAT.
Transitional rules
The announcement of the changes was made on 29 July 2024.
Payments relating to school terms starting from 1 January 2025:
- Made before 29 July 2024: the VAT treatment will follow the treatment in force at the time of the normal Tax point for those supplies.
- Received between 29 July 2024 and 29 October 2024 will be subject to VAT from the later of the first date of the school term that the fees have been paid for and 1 January 2025.
- Received from 30 October 2024 will be subject to VAT on the date the payment is received.
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.
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 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.
- Activities of charities that run private schools.
- Supplies provided for the classroom.
- Nursery classes provided by private schools.
- VAT implications for further education colleges.
- Definition of board and lodging fees.
- Donations and voluntary contributions to private schools.
- Reclaiming VAT, including the Capital Goods Scheme and Partial Exemption.
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
VAT on Private School Fees & Removing the Charitable Rates Relief for Private Schools: technical note, 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