Government plans to impose VAT on private schools from January 1 next year may have to be delayed amid warnings from unions, tax experts and school leaders that meeting the deadline would cause administrative chaos and the loss of teaching jobs, putting pressure on the state sector.
The Treasury on Saturday night refused to confirm that the plan to impose 20% VAT on private school fees would continue from January 1, as confirmed by the chancellor, Rachel Reeves, in July, instead saying it would be introduced “as soon as possible”.
Several organizations in the education sector, including those backing the principle of imposing VAT, are calling for a delay until next September to give private schools more time to register for the new tax, assess the impact and adapt.
There are also concerns about the effect on the Special Educational Needs and Disabilities (Send) sector if more state schools are to carry out Send assessments on pupils transferring from private schools.
Heads of private schools say they still cannot register for VAT because the plans are not yet legislated and will not be until after the October 30 budget.
Accountants and tax experts say there will be too little time for organizations, often with little tax expertise, to adapt. Bills for the term starting in January are normally issued in December. Doubts are being raised about the timetable after the Treasury was bombarded with calls for delay and demands to carry out a proper impact assessment in responses to an official consultation which ended last month.
Teachers’ union NASUWT said in its response that while it shares the government’s ambition to “break down the barriers to opportunity” and recruit 6,500 more teachers into the state sector, it is concerned about redundancies for those in the private sector and the risk of permanent job losses from the profession.
It suggests that an impact assessment should be carried out on the possible increase in Send assessments in the government sector and the level of provision required.
It says: “We request that a more reasonable timeframe be proposed to implement the change fairly and without undue disruption to teachers, students and parents.”
The Association of School and College Heads says in its submission: “We would strongly recommend that the Government undertake and publish a comprehensive impact assessment and a full consultation of these proposals before they are formalized into legislation, and that it postpones their implementation until September 2025. at the earliest.”
While the government is not considering watering down the content of the plan, any delay would be an embarrassment to the Treasury, which has already made clear it is reconsidering parts of Labour’s manifesto plan to scrap non-judgment tax status amid concerns the reforms will bring in less money than expected.
There are concerns that planned changes to tax arrangements for non-doms, which were aimed at raising extra cash to spend on public services such as the NHS, could prompt wealthy foreigners to simply leave the UK.
The private school VAT plan, like that for non-doms and their tax arrangements, was one of Labour’s more high-profile policies, which it said would help pay for new teachers, as well as free breakfast clubs in all primary schools.
Asked if the plans could be delayed, the Treasury issued a statement from a government spokesman that did not address the issue directly: “We want to ensure that all children have the best chance in life to succeed. Ending private school tax breaks will help to raise the revenue needed to fund our education priorities for next year, such as recruiting 6,500 new teachers.
“The Government has carefully considered views on this policy and will publish a response to the consultation at the Budget.” Sources said only that the plans would be introduced “as soon as possible”.
In its submission to the Treasury hearing, the Chartered Institute of Taxation, the UK’s leading professional body on aspects of taxation, said: “We are concerned that neither HMRC [HM Revenue and Customs] the private schools will also not be ready to implement the change in VAT liability effectively with an effective date of 1 January 2025.
“As there is currently no tax information and impact note or published guidance, with an implementation date of 1 January 2025 effectively shortened by schools closing in mid-December, we recommend that the implementation date be delayed accordingly.”
The Association of Taxation Technicians said: “The proposed start date of 1 January does not allow sufficient time for schools or HMRC to adequately prepare and deliver the proposed changes. Starting halfway through an academic year may also cause additional difficulties for schools and pupils. It should be considered to postpone until September 2025.”
Julie Robinson, chief executive of the Independent Schools Council, said: “Even those who are in favor of imposing VAT on the independent sector say January 1 is not possible.”