Official guidance on charging VAT on private school fees is “not fit for purpose”, the independent sector’s leading members’ organisation has said.
In a letter seen by Tes, the Independent Schools Council (ISC) - which represents more than 1,400 schools across seven member associations - said that recently published HM Revenues and Customs (HMRC) guidance is ”poorly drafted” and “does not give schools the information they need to operate VAT from January”.
Writing to chief Treasury minister James Murray on Monday, the ISC said it was “grateful” to have been able to comment on draft versions of the guidance.
However, the final guidance that HMRC released last week was ”broadly unaltered” and does not take into account “many of the legitimate questions and concerns that were raised”, the ISC said.
The organisation described the decision to exclude most of its feedback as “disheartening” and “disappointing”.
The letter is signed by all seven of ISC’s member organisations, including the main bodies representing boarding schools, international schools, prep schools and private senior schools.
‘Confusion’ over VAT on private school fees
In the documents released last week, HMRC confirmed that the tax will come in from 1 January 2025, despite concerns being voiced by unions that the timing could lead to unbudgeted staffing changes and teacher redundancies.
HMRC has also said that VAT changes will be introduced from the date of the Budget, on 30 October.
The ISC’s letter said that both the draft guidance and the final published version of the guidance were not “fit for purpose”, and failed to provide the “clear and comprehensive overview schools need”.
It added that the guidance is “confusing, partial and lacking in relevant examples for schools”, most of which will not have the “knowledge or experience of operating” such a tax.
“Clear and understandable guidance is needed if mistakes are not to be made,” the ISC warned.
‘Tension’ over tax exemptions
The Treasury documents also provided details about which goods will be exempt from tax, such as school meals, books and stationery. HMRC said these goods were necessary for the delivery of education and were VAT exempt.
ISC said that differing tax levels across different aspects of education created an “inherent tension and confusion” for independent schools.
Catering costs and the cost of therapy for pupils with special educational needs and disabilities are two examples of where this confusion could arise, ISC said.
Schools ‘need simplified message’
ISC also called for the Treasury to provide ”more practical clarity” and a “simplified message” on how and when schools need to register for VAT.
”Registration will be the first step schools take in the VAT system, yet the guidance on registration with myriad of examples and timelines still feels confusing,” the organisation said in response to separate HMRC guidance on how schools can register for the tax.
There is also “insufficient detail and definition” in relation to boarding pupils, the letter said.
According to the guidance, board and lodging are not defined in legislation and refer to “the arrangement where a pupil lives in school accommodation”.
ISC said this phrase left many unanswered questions around the VAT treatment of boarding and welfare services provided to boarders, and when the school day starts and stops.
“There is no information on the treatment of services closely related to boarding and how this should be defined,” it added.
The organisation also queried the lack of distinction between private schools and independent schools in the guidance, asking: “What is the difference and how are each being defined?”
Tax experts have criticised the guidance as being “full of errors”, according to national newspaper reports.
Tes understands that the Treasury is yet to respond to ISC’s letter.
An HMRC spokesperson said the department had consulted groups representing private schools to ensure their members understood the draft guidance, and “acted quickly” on feedback to make changes, “including clarifying the VAT rules around other types of supplies closely related with education - sharing examples on the likes of stationery and school meals.”
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