Head's Blog: A Message on VAT

As the General Election campaign has been progressing over recent weeks, and we now find ourselves within a fortnight of the ballot, I wanted to update you on the possible outcomes from the election. You do not need me to tell you that the polls at the moment continue to show a significant lead for Keir Starmer and the Labour Party, and projections for the final result are showing that he will have a substantial majority, somewhere around the mark that Tony Blair had when he became Prime Minister with 'New Labour' back in 1997. Throughout the campaign, it has remained consistently the case that Labour politicians have spoken about taxing independent schools in order to raise £1.6 billion. This figure has been worked out on the basis of 20% VAT being paid on all fees currently being paid within the sector, and the money raised has been directed towards a number of policy ambitions, but most commonly towards the recruitment of an additional 6,500 teachers for the maintained sector. This was confirmed in the Labour manifesto of last week, with the sum being clarified as £1.51 billion, and this being used for teacher recruitment, mental health provision within the state sector and breakfast clubs in primary schools, among other things.

With this policy having appeared prominently in the manifesto, it seems highly likely that it will be included in the King's Speech (Wednesday 17 July). This should provide a bit more detail as to how the tax will be applied, and possibly even when it is to be applied. At the moment, schools remain in the dark with regard to these key areas, which is making planning more difficult. Because the election is taking place in July, it is not impossible that any new tax could be applied from the coming term. The 'chatter' seems to suggest that the new tax year (ie. from April 2025) is more likely, but this is only a best guess at this stage.  

I am aware that a significant number of parents have accessed our fees in advance scheme, as parents have across the sector. Families have used this route in the past to assist their financial planning. Going forward, however, the tax position of these schemes is not clear and none of the experts can say how they will be viewed by HMRC. The tax laws are complex in this area, and at the moment it is not clear that a fee in advance payment would achieve the desired outcome, if the tax is applicable at the point of delivery of the service rather than at time of payment. Therefore, I would urge those using the scheme to have realistic expectations in terms of outcome.  

In addition, there was quite a bit of talk a few months ago, about the possibility of separating Boarding from Education, and charging this separately, so that the VAT would not be applicable in this area. Again, this does not appear to be likely to be deemed permissible from what has been said so far. There are elements of our costs that are currently VAT-able, and we should therefore be able to claim back some costs as a result. We are also reviewing all of our costs in order to see where efficiencies can be made, and to ensure that we operate in the most efficient way, while not wanting to lose our distinctive all round education.  

At the point when we know if, when and how VAT is being applied, we will be in touch with you to confirm our approach. We have taken expert advice and modelled a number of different scenarios to understand how we can best stand alongside parents in facing this challenge. You can be assured we are identifying as many practical and sensible options as possible to reduce the direct impact. We also have to act responsibly for the future of the school, and therefore we do know that these developments will affect your fee levels. However, we are aiming to settle on a level that is as sustainable for both the school and our families.   

We do understand that this is a concern and if you do wish to talk to us about fees in advance, the person to contact is Peter Beament, Head of Finance (headfinance@felsted.org). If you would like to do something to raise awareness among politicians and candidates, I encourage you to write a letter to those standing for office in your local constituency as we want the candidates to understand the wider impact on the sector that this policy could have. The more people that are aware of that possible impact, the better. The school has also been in direct contact with local candidates. We are also going to be sending out separately a short survey for parents to gather more information about affordability in order to help us with our planning for the coming years. This will be carried out by a third party, so all returns are anonymous, but will give us some very helpful data to help us to work out priorities and budgets for the years ahead.

Felsted has an incredibly proud history, from its foundation in 1564, through to its part in the foundation of HMC (The Heads Conference), and more recently celebrating its 460th anniversary and being voted the TES Boarding School of the Year. We are in a good position to continue to flourish in the years ahead and we very much hope that you will want to stay within the Felsted community during this next crucial phase.

Our faith is strong that the future is something that we can navigate successfully together. Thank you as always for your commitment to Felsted and 'garde ta foy'

Chris