Labour has announced a new initiative aimed at private school fees, ensuring a more equitable tax system.
- Anti-forestalling legislation will be introduced to prevent parents from pre-paying school fees before the VAT comes into effect.
- Labour’s plan includes implementing a 20% VAT on private school fees, starting by next September.
- The initiative could generate up to £1.7 billion, potentially funding significant improvements in state education.
- Tax experts have raised concerns about the complexity of the proposed legislation for schools and parents.
Senior Labour sources have confirmed the introduction of anti-forestalling legislation to halt pre-payments on school fees before the VAT is implemented. This step is intended to close a loophole exploited by some schools, which encourage parents to pay years’ worth of fees upfront, sometimes offering up to 5% in discounts.
Rachel Reeves, Labour’s shadow chancellor, has announced that this 20% VAT will be included in her first budget, expected in September if Labour wins the election. While the actual VAT enforcement is slated for next September, the anti-forestalling legislation ensures that advance payments for future education are still taxed.
Labour’s strategy takes cues from a similar approach adopted by former Chancellor George Osborne in 2010. Bridget Phillipson, Labour’s shadow education secretary, reiterated the party’s intent to act swiftly, emphasising that private schools have had sufficient time to prepare for these changes.
The projected £1.7 billion in revenue from this measure is earmarked for state education, with plans to recruit 6,500 teachers, 8,500 mental health specialists, and 1,000 careers advisers. Such investments reflect Labour’s broader goal of enhancing educational opportunities and services in the public sector.
Despite some private schools updating their policies to notify parents of potential VAT charges, tax experts like Mike Warburton warn that the new legislation could introduce complexities for both educational institutions and parents. Labour asserts that this move underscores its commitment to ensuring that tax benefits serve the wider public interest, particularly in improving state education.
Labour’s VAT initiative on private school fees aims to enhance state education funding, despite potential complexities for schools and parents.
