New HMRC guidance published on VAT and private school fees
10 October 2024| CATEGORIES: Private school fees, standard rated, VAT registration| TAGS: Budget, HMRC guidance, VAT on school fees
HMRC have published the following guidance in relation to the introduction of VAT on private school fees:
- Check if you must register for VAT if you receive private school fees
- Charging and reclaiming VAT on goods and services related to private school fees.
The guidance includes the following caveat:
This guidance is based on the technical consultation and draft legislation announced in the written ministerial statement of 29 July 2024 regarding the intention to remove the VAT exemption from private schools.
This guidance will be updated if any policy or legislative changes are announced at Budget 2024.
Background
In July 2024 the government announced that, from 30 October 2024, school and boarding fees for school terms starting on or after 1 January 2025 will be taxable at the standard rate of VAT of 20%. See our earlier blog article for further information.
What is covered in the guidance
Education providers that charge school and boarding fees should read the guidance to check when they need to register for VAT because of these changes. Further information is provided on the VAT rules applying to prepayments received in respect of school terms starting on or after 1 January 2025
The guidance includes details of the business activity and Standard Industry Classification Code that should be included in the relevant sections of the registration application.
The guidance also explains how some payments and situations relating to education will be treated for VAT, including:
- Situations when there is a single supply or multiple supplies
- The VAT treatment of bursary payments
- Local authority placements in private schools
- Supplies provided for the classroom
- When VAT can be reclaimed
- Partial exemption and capital goods scheme implications
- Potential tour operator margin scheme issues.
There has been speculation that the introduction of VAT on private school fees may be delayed. It is advisable that private schools review the guidance and start planning accordingly ahead of any further announcements that are made in the Budget on 30 October 2024.