Chancellor's announcement and private Schools

Today's announcement by the Chancellor has set the stall for the next few months. Of interest to schools will be numerous parts of this announcement and the related documents. One can't but help thinking that it is not good news for private schools. See the most important announcements as they relate to public and private schools;

1) the acceptance of the public pay review body to a pay increase of 5.5%.

How will this be funded for state schools? Partially by departments 'absorbing costs' (sound familiar?!) and part... not announced.

This means that teachers and school leaders should see a significant pay increase (in fact bringing increases over the past 3 years to over 15%. Not bad.).

Hopefully schools will see extra income from the Government. But... as numerous schools found out with the pension cost increase, the extra income didn't match the extra costs.

And for private schools... expect pay increase demands to match the public sector. 

2) for private schools, VAT will be charged from January.

This isn't a huge surprise, though the nuts and bolts and getting schools registed in time will be difficult. Bookkeeping systems will need updating (contact us for help!) and there will be numerous unintended consequences.

If you are a private school and need to spend money... it may be worth delaying until January??

And if your struggling with school fees before the 20% increase ... our sympathies. The Government has said absolutely nothing about the consequences of schools needing to close due to financial pressures.

And don't think about paying your schools fees early - as of today (July 29th), any payments related to January 25 school fees are VATable.

3) supplies "closely related" to educational supplies will remain exempt from VAT 

Examples given are school meals, transport, books and stationary. The guidance documents do pave the way for some nifty VAT planning - by invoicing these items separately, fees could be reduced. But woe betide those who play the game too hard - "HMRC will challenge any school who seeks to avoid their full VAT liability in this, or any other, way"

However this will make the school "partially exempt" and the VAT calculations are complex. It's not going to be easy.

4) business rates relief will disappear

Worryingly, business rates discounts for private schools which are charities will also disappear. This could lead to a 5 x increase in the amounts of business rates being charged. Not fun at all. There will be some mitigation on this for schools which cater for pupils with an EHCP.

This will not apply where the property, or parts of it, are used solely for disabled persons.

 

So if you are running a private school, expect that the future months will bring a demand for a 5.5% pay increase, business rates to quintuple, and a requirement to charge VAT on school fees together with some very tricky accounting. I leave the (second) last word to the Government;

"The government does not expect fees to go up by 20% as a result of this policy change. Rather, the government expects private schools to take steps to minimise fee increases." 

Coming from the party that is making accusations about unfunded spending plans, it sounds a bit rich.

 

Please post responses below! Looking forward to read.

Happy chasing,

Yehuda