Labour plans to impose VAT on fees for private schools could force the closure of smaller private schools, “hurt” the country’s entire education system and set a dangerous precedent, say independent school organisations.

The Independent Schools Council (ISC) has told Tes the measures, as set out in a leaked document from the shadow treasury, would force smaller private schools to close, resulting in “a sudden increase” in the numbers of children needing places at state schools - thereby “swelling class sizes and heaping pressure on already-stretched budgets”.

The document, seen by the Daily Telegraph, includes scrapping business rate exemption for private schools, which Labour estimates would bring in an additional £1.64 billion in tax revenue annually.

The plans are said to have been prepared by shadow chancellor John McDonnell’s team and form part of Labour’s “preparing for government” strategy, in anticipation of a snap general election.

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ISC chief executive Julie Robinson said: “Currently, 600,000 children are educated in independent schools, saving the taxpayer £3.5 billion. These schools employ tens of thousands of teachers and support staff and a drop-off in the number of independent school pupils would result in staff redundancies. Along with job losses, there would be negative impact on many local suppliers, who rely on independent schools as part of their supply chain.

“A punitive tax measure such as VAT on fees would ultimately hurt the country’s education system.

“In addition to not taking pupil displacement into account, the policy fails to address VAT recovery, something schools would become eligible for if it were introduced. Analysis by Baines Cutler [a consultancy] shows that the policy would not raise money, but would end up costing any government at least £416 million in its fifth year and will not provide money to support spending pledges. There is a clear contradiction in a policy that aims to raise revenue from independent schools and reduce demand for them at the same time.”

Mike Buchanan, executive director of the Headmasters’ and Headmistresses’ Conference (HMC), which represents leading private schools, said: “The Labour campaign to effectively destroy independent schools is not only a fundamental attack on parental choice, but it would rip apart the fabric of education in this country.

“It is based on wrong assumptions and dodgy maths and will inevitably damage state schools.”

The implications of the state “unilaterally altering the definition of what a charitable endowment is would set a dangerous precedent with wide-ranging implications”, he added.

“Would the general public be comfortable with an education system that offers no alternative to government-run schools? Will universities welcome state control of admissions and being told to admit by quota not ability?”

Around 1,000 private schools currently hold charitable status, with many benefitting from an 80 per cent discount on business rates estimated to be worth more than £500 million over five years.

Tes reported that a motion calling for the state to take control of all private-school assets is set to be considered at the Labour Party conference next week.

The motion, submitted by the Labour Against Private Schools campaign, calls for “endowments, investments and properties held by private schools to be redistributed democratically and fairly across the country’s educational institutions”.

Speaking in Glasgow today, Mr McDonnell told the PA news agency: “In the last election we said we would address what we believe is the inequality within our education system, and one of those inequalities is the way in which private schools do not pay VAT and on business rates there needs to be reforms as well.

“Let’s make it absolutely clear, we want private schools to be treated like any other businesses, because that is what they are.”

Labour said it does not comment on leaks.