Private Schools: Are You Charging VAT Correctly?

The new VAT rules for private schools are now in effect, but many schools risk non-compliance due to incorrect invoicing and fee structures. Mistakes in bundling fees, handling deposits, and contract wording could lead to unexpected VAT liabilities. Getting it wrong could mean financial losses or HMRC penalties.

📌 Key Mistakes to Avoid

• Bundling fees incorrectly – If tuition, meals, and supplies are charged together, the full amount is subject to VAT, even if some items could be VAT-exempt.
• Ignoring VAT on deposits – Advance payments for terms starting in 2025 must include VAT, even if paid before 1 January 2025.
• Failing to update contracts – If VAT is not clearly stated, HMRC may assume fees are VAT-inclusive, reducing revenue.
• Misclassifying activities – Some services like after-school childcare may be VAT-exempt only if structured correctly.

📌 What Should Schools Do Now?

• Review fee structures – Separate VAT-exempt and standard-rated elements.
• Update contracts – Ensure VAT is clearly stated and recoverable where possible.
• Adjust pricing strategies – Plan for the financial impact of VAT on school fees.
• Seek expert guidance – HMRC will scrutinise compliance, and mistakes can be costly.

Schools must act now to ensure compliance and avoid financial pitfalls. A proactive approach could mean the difference between smooth VAT implementation and costly penalties.