Unlock the Editor’s Digest for free: Private Schools in the UK Utilizing Advanced Payment Schemes to Avoid Labour’s Tax Plan

Private schools in the UK are finding creative ways to navigate potential tax changes proposed by the Labour party, with some schools offering advanced payment schemes to parents in order to avoid additional costs.

Labour leader Sir Keir Starmer announced plans to end a VAT exemption for private schools if the party wins the next election, which could result in a 20% increase in fees. In response, some schools have started advertising schemes that allow parents to pay fees for multiple years in advance, potentially saving them money in the long run.

While some smaller and lesser-known private schools have embraced these new payment plans, more established institutions are hesitant to do so, fearing potential tax implications in the future. The uncertainty surrounding the tax changes has led to a divide among schools in how they approach advanced payment schemes.

Solihull School in the West Midlands and Boundary Oak School in Portsmouth are among the schools that have recently introduced fees in advance schemes. These schools are upfront about the possibility of VAT being added to fees in the future, but assure parents that payments made in advance would not be subject to the tax.

Tax experts warn that schools and parents should proceed with caution when considering advanced payment schemes, as there is a risk of facing unexpected VAT charges in the future. The potential for retrospective legislation could further complicate the situation, leading to challenges from HM Revenue & Customs.

Despite the uncertainty, the Independent Schools Council maintains that fees in advance schemes are legitimate and have been used for various reasons over the years. Schools are advised to be transparent about these schemes and not market them as a way to avoid paying taxes.

As the debate over private school fees and tax exemptions continues, parents and schools alike are urged to seek legal advice and stay informed about any potential changes that could impact their financial planning.