On the 17th of July, amid much pomp and pageantry, Britain’s King Charles III delivered “the King’s Speech” (which was actually written for him to convey by the newly-elected Labour government). One brief passage from that speech has sent shivers through the world of British private, fee-paying schools: “Measures will be brought forward to remove the exemption from Value Added Tax for private school fees, which will enable the funding of six and a half thousand new teachers.”
In short, effective January 1, 2025, the Labour government plans to impose Value Added Tax (VAT, a form of sales tax) on private school fees, which up to now have been exempt from VAT. It is projected that this could raise £1.6 billion each year, which will be used to better fund state (public) schools. While the details of this change are still being worked out, it will likely result in an increase in private school fees of about 15%. There are about 2,500 private schools in the UK, educating about 7% of all pupils, including about 570,000 students in England alone.
This is causing a wave of concern and uncertainty for private schools and fee-paying parents, and of course for those employers who provide education benefits for their assignees’ children in the UK. While it is too early to be certain about the precise details and impact of this proposed change, here are some points to keep in mind:
In response to this proposal, some schools have already tried to offer a ‘pay now and save later’ solution of pre-billing/pre-paying future fees, but the government quickly announced plans to close this loophole. It seemed like a promising idea for a brief moment, but no longer.
There may be some ways of structuring the payment of fees so as to lessen the tax impact, but it appears to be a remote possibility; employers should consult their tax advisors for guidance.
It is likely that there will be a wave of families moving from fee-paying schools to public/state schools, so the already overburdened state system may become even more competitive and tougher to navigate.
Employers who offer assignees a capped allowance for UK school fees should reexamine those caps and consider adjusting them upwards.
Any organization whose mobility policy includes payment of school fees in the UK should revisit assignee-cost budgets and adjust as appropriate; school fees are certainly increasing.
The proposed changes have not yet been enacted into law, so changes are still possible. Bennett will continue to monitor developments on this front and is available to advise on possible changes to mobility policies; we will be sure to post updates as warranted.
Timothy Dwyer, President
Over the years, Bennett International Education Consultancy has worked with hundreds of corporations across the globe, many of them Fortune 500 companies, providing domestic and international school advisement & placement services - preschool through university - to the dependents of relocating employees. In addition to education placement, our team provides customized consulting for corporations with a range of education issues: education policy writing & benchmarking, tuition studies, group move advisement & planning, and remote education solutions.