Private Schools and potential VAT on school fees

Jaspal Dhillon, 5 September 2023

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The possibility of VAT becoming applicable to private school fees is looking highly likely following recent by-election results and generally the current government’s popularity. If there is a Labour government after the next general election, it is difficult to see how any U-turn can be made by them on what is a key manifesto pledge - to add VAT to private school fees.

Implications for private schools

Private schools are now faced with a pressing question: What does this prospective change mean for them, and what considerations should they be factoring in as they prepare to account for VAT?

Price adjustment

The most obvious implication is the potential for price increases. Should there be an across-the-board increase of 20%, passing on the VAT burden to the parents? Or could the school absorb the VAT charge, or at least some of it? It’s noteworthy that treating the school fees received as VAT inclusive means 20% VAT is paid out of the amount received - currently, this equates to 1/6th of school fees.

Changes in VAT recovery

VAT may be payable, however it will also become recoverable where it currently isn’t. An analysis should be undertaken, and VAT incurred on current costs that is not claimed should be looked at and calculated, as this will be offset against any VAT payable on the receipt of school fees.

Looking at 1&2 above alone, it is clear that it is not just a case of passing on an extra 20% increase to customers/parents.

Additional VAT recovery opportunities

There could be other opportunities for VAT recovery, such as certain capital costs incurred in the last 10 years where VAT was not claimed, may now be claimable (at least in part). This could result in a VAT windfall in some cases.

For an instance, consider a school refurbishment carried out 2 years ago, during which significant amounts of VAT was incurred but not claimed. However, with the new applicability of VAT to school fees, there is now an opportunity to potentially claim back this previously unclaimed VAT.

There are also other potential VAT recovery opportunities such as ‘change of use’ provisions applicable to costs where VAT has not been claimed. For example, are there purchases that have not yet been used by the school to make supplies. The VAT may currently be irrecoverable and now will be, if school fees become VATable.

How can we help

Private schools should be discussing these issues with their advisers in order to assess the potential impact of VAT on school fees. At Lubbock Fine we have extensive experience of advising clients on VAT matters in the education sector.

If you are a private fee paying school and would like to have an initial free of charge conversation about how these likely changes will impact your school, please contact our VAT partner Jas Dhillon ( or VAT senior manager Sharon Parker ( to discuss.