VAT on school fees (if Labour win)

[BlueSharp]

If Labour win I will ask my accountant, but thought I would ask here first.


Is there any benefit to paying the BIK on my company paying the school fees directly and allowing the company to reclaim the VAT?

[malvolio]

If Labour win I will ask my accountant, but thought I would ask here first.


Is there any benefit to paying the BIK on my company paying the school fees directly and allowing the company to reclaim the VAT?

If you can justify it as a cost wholly and exclusively related to your company's trade, then yes.

Sadly, you can't.

Where did you get the idea that YourCo is merely a glorified piggy bank I wonder...

[BlueSharp]

If you can justify it as a cost wholly and exclusively related to your company's trade, then yes.

Sadly, you can't.

Where did you get the idea that YourCo is merely a glorified piggy bank I wonder...

I suspect you can claim the VAT but the supply of the (school) service would have to have VAT added back onto it making it tax-neutral, so no benefit, and the VAT is included in the BIK calculation. So not worth doing.

It would make for an interesting argument taking them on as an apprentice and claim 95% back from the government. ;-)

[northernladuk]

It would make for an interesting argument taking them on as an apprentice and claim 95% back from the government. ;-)

No it wouldn't. An apprentice can't be in full time education. It might provide some amusement when you make yourself the laughing stock but that's all.

[BlueSharp]

No it wouldn't. An apprentice can't be in full time education. It might provide some amusement when you make yourself the laughing stock but that's all.

As ever the idiot comes along to stick his oar in.

[fiisch]

Sadly not - the loophole doesn't work as VAT is still chargeable when there is a personal benefit.

However:

1). It's a silly Labour soundbite saying they'll charge VAT on school fees they've been trotting out since the 90s as a way to win cheap votes.

2). They'd alienate (or even are alienating) some of their existing voters, especially those who aren't wealthy but send their kids to private school courtesy of bursaries/scholarships and the like. What happens to the kids currently attending private school whose parents just afford it, but couldn't cover the extra 20%? Where are the spaces in the state system to educate the children who would have gone/did go to private school but whose parents can no longer afford it?

The more likely workaround to escape the VAT charge will be to fund future school years up front if possible, so to "pay off" the remainder of the child's fees before the legislation is put into action.

[northernladuk]

As ever the idiot comes along to stick his oar in.

I'm the idiot? That's rich. You ask daft questions in prof you'll get short shrift. Own it.

[jamesbrown]

Sadly not - the loophole doesn't work as VAT is still chargeable when there is a personal benefit.

However:

1). It's a silly Labour soundbite saying they'll charge VAT on school fees they've been trotting out since the 90s as a way to win cheap votes.

2). They'd alienate (or even are alienating) some of their existing voters, especially those who aren't wealthy but send their kids to private school courtesy of bursaries/scholarships and the like. What happens to the kids currently attending private school whose parents just afford it, but couldn't cover the extra 20%? Where are the spaces in the state system to educate the children who would have gone/did go to private school but whose parents can no longer afford it?

The more likely workaround to escape the VAT charge will be to fund future school years up front if possible, so to "pay off" the remainder of the child's fees before the legislation is put into action.

I think this is a rather optimistic take given that Labour has been exploring anti-avoidance measures too, such as making the VAT chargeable when the education is received.

[Snooky]

Quite a lot of people I've worked with in London over the years sent their kids to a private school, purely because the local state schools were so grim. They were well paid but not wealthy, in most cases they didn't want to have to do it, it cost them a huge amount of money, but the state wasn't delivering.

I personally disagree with private education for various reasons, but I also think it's unreasonable to penalise it unless the state-provided alternative is adequate.

The government is relieved of the cost and logistics of educating around 600,000 kids every year, in return for which they forgo a small percentage of that cost in a few tax breaks. In 2018 the cost to government of putting a child through the UK state educational system (primary & secondary) was estimated at around £73,000, I suspect it's far higher now. So 600k kids in private schools may have saved the UK taxpayer a gross amount of up to £44bn over their entire school career. Have the government used the extra cash they didn't have to spend on those 600k kids per year, to improve and elevate the state system so that more parents would feel happy not using private education?

Labour know as well as anyone else that if they make private education unaffordable for many parents, the state schools will quickly become even more oversubscribed and they'll end up with a real funding headache. So IMHO this is all just lip service to their more traditional supporters.

</rant>

[malvolio]

Quite a lot of people I've worked with in London over the years sent their kids to a private school, purely because the local state schools were so grim. They were well paid but not wealthy, in most cases they didn't want to have to do it, it cost them a huge amount of money, but the state wasn't delivering.

I personally disagree with private education for various reasons, but I also think it's unreasonable to penalise it unless the state-provided alternative is adequate.

The government is relieved of the cost and logistics of educating around 600,000 kids every year, in return for which they forgo a small percentage of that cost in a few tax breaks. In 2018 the cost to government of putting a child through the UK state educational system (primary & secondary) was estimated at around £73,000, I suspect it's far higher now. So 600k kids in private schools may have saved the UK taxpayer a gross amount of up to £44bn over their entire school career. Have the government used the extra cash they didn't have to spend on those 600k kids per year, to improve and elevate the state system so that more parents would feel happy not using private education?

Labour know as well as anyone else that if they make private education unaffordable for many parents, the state schools will quickly become even more oversubscribed and they'll end up with a real funding headache. So IMHO this is all just lip service to their more traditional supporters.

I also hear the Pope tends to the Catholic religious viewpoint...

Don't make the mistake of thinking that Labour has any kind of monetarist economic awareness. History has proved that all they know is tax and spend and "cost vs value" is an alien concept. You might also spot they appear to have spent the VAT recovered by this particular exercise at least three times.

The real problem now is that the Tories are pursuing the same basic economic approach... Bring back the disciples of Lawson!!