Rupert Moyle BA (Hons)
- Partner and Head of VAT and Duty
- +44 (0)330 124 1399
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View all peoplePublished by Rupert Moyle on 30 October 2024
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Since the Chancellor’s announcement on 29 July 2024 that VAT will be introduced on Private School fees and boarding services from 1 January 2025, bursars had hoped for both clarification on certain matters by HMRC and that the Chancellor’s Budget may announce a stay in proceedings to give further time for systems implementation.
On 10 October HMRC issued further guidance. Although being rather general, this helped to clarify certain matters, such as the timing of registrations and when to account for VAT on advanced fees for school terms after 1 January but received between 29 July 2024 and the Budget on 30 October. But it left some doubt, such as to the definition of “board and lodging”, simply saying this was not defined in legislation, and what that included. It also led to some ambiguity as to whether schools could treat catering and transport, for example, as ‘closely related’ items and so exempt from VAT as initially announced, or instead subject to VAT as announced on 10 October, where ancillary to a predominant supply of education. The guidance suggested that simply charging a separate fee might usually indicate that catering, for example, is closely related rather than part of the education and so be exempt.
Whilst the Chancellor’s announcement in the Budget on 30 October did not please bursars and announce a delay – VAT will apply to private school fees and boarding from 1 January 2025 – there was a response to the period of consultation during August and September. The Government has stated that it will make concessions and adjustments to the draft legislation, carving out certain types of school or relaxing definitions in the legislation. For example, the amendments include, but are not limited to:
What is interesting in the Government’s response to the consultation is that they have included further comments in respect of school meals. They say that when these are sold separately, i.e. they are “itemised separately on invoices and parents have a choice as to whether or not they purchase them…” they will remain exempt from VAT. Schools will need to consider whether their catering, transport and other goods and services supplied to pupils are in fact separate and exempt, or part of the fee charged for the education.
If the Autumn Budget has raised any questions for you, book your place on our question time webinar this Friday at 9:30am. Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.
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