The UK tax authority, His Majesty’s Revenue and Customs (HMRC), has issued a guidance for private education providers regarding the upcoming obligation to charge value added tax (VAT) on school and boarding fees on 10 October 2024.
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.
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%.
Education providers that charge school and boarding fees must check if they need to register for VAT because of these changes.
Who must register for VAT
You must register for VAT if you’re a private school or connected person that supplies education services, vocational training or boarding services and either:
- your total taxable turnover for the last 12 months is over GBP 90,000
- you expect your total taxable turnover to go over GBP 90,000 in the next 30 days
Taxable turnover is the total value of everything you sell that is not VAT exempt or ‘out of scope’.
A connected person is a body closely bound to a private school by financial, economic, and organisational links. They can also be connected for the purposes of section 1122 Corporation Tax Act 2010.
For VAT purposes, a private school is any school or institution that provides full time education for a fee to either:
- pupils of compulsory school age
- 16- to 19-year-olds, where that institution is primarily concerned with providing education suitable to that age range
This includes:
- private schools
- independent schools
- private sixth form colleges
Classes for children under compulsory school age (for example, nursery classes) will be exempt from VAT. If you’re a school that only provides these classes you will not need to register for VAT.
When you must register
Education providers will be able to register for VAT from 30 October 2024.
The exact date when you need to register for VAT will depend on:
- the value of school fee payments you receive for terms starting on or after 1 January 2025
- the date you receive the payments
Payments include registration fees paid during the application process to attend a school.
If you receive payments in advance then you may need to register before 1 January 2025, depending on when you received the payment.
If you register because you have exceeded the GBP 90,000 VAT threshold in the previous 12 months, you must register within 30 days of the end of the month in which you exceeded the threshold. Your effective date of registration will be the first day of the second month after you went over the threshold.
If you register because you expect to exceed the VAT threshold in the next 30 days, you must register in the next 30 days. Your effective date of registration will be the date you realised you will exceed the threshold.
You should not charge VAT or produce VAT invoices until you have registered for VAT.
