VAT on independent school fees: Court of Appeal now dismisses legal challenge
The Court of Appeal (CoA) has determined that removing the VAT exemption for private school fees is compatible with the European Convention on Human Rights (ECHR).
Recent legal challenges to the introduction of VAT on independent school fees have been dismissed by the courts, signalling that - at least for now - the policy is set to remain in force.
The claims, brought by groups of parents and supported by the Independent Schools Council, argued that applying VAT to independent school fees was discriminatory and breached human rights law. The challenges focused on three key groups:
- children with special educational needs and disabilities (SEND)
- pupils attending single sex schools
- those attending low cost faith schools
Some families argued that suitable state funded alternatives were not available in their local areas, particularly for children with SEND, and that the imposition of VAT on school fees was unprecedented across Europe.
What the Court decided
The Court accepted that the legislation interfered with certain rights protected under the European Convention on Human Rights. However, it ultimately concluded that the Government was entitled to proceed.
In reaching its decision, the Court emphasised that there is a broad margin of discretion available to Parliament when balancing the interests of groups adversely affected by a policy against the wider public interest - particularly where additional tax revenue is intended to support public services. The judges also confirmed that the Government had followed appropriate legislative and consultation processes when introducing the change, consistent with its stated policy objectives.
In relation to faith based education, the court rejected arguments that parents had a right to education of a particular religious character or quality beyond that available within the state system. It also found that the Government had provided objective and reasonable justification for not exempting low cost or faith schools from VAT, citing several policy and administrative considerations.
Key details: VAT on independent school fees
What is subject to VAT?
- All education services provided by independent schools
- Boarding services
- Provision for pupils with special educational needs and disabilities
When does VAT apply?
- Fees for terms beginning on or after 1 January 2025 are subject to VAT at 20%
- Fees paid in advance for terms starting on or after 1 January 2025 are also subject to 20% VAT, closing previous advance payment planning arrangements
What may retain relief from VAT?
Some elements, such as school transport and books may retain relief from the imposition of VAT, depending on the circumstances.
What happens next?
Andrew Hopkins, from our VAT team, commented:
“The Court’s decision is unlikely to mark the end of the dispute, with the claimant groups already stating their intention to take the matter to the Supreme Court. The decision does, however, represent a significant blow to those seeking a successful challenge to the Government’s decision to add VAT to private school fees.”
For the immediate future, the decisions provide a strong indication that VAT on independent school fees is here to stay, and schools should continue to plan on that basis.
We’re here to help
If you are an independent school and have any questions on the introduction of VAT on school fees, please don’t hesitate to get in touch. Azets’ specialist VAT team has been assisting many schools navigate the change and mitigate the impact.
