Some schools are taking a reactive approach to these requests, but others may be considering promoting the availability of as suitable Fees in Advance Scheme.
Whilst many schools have existing Fees in Advance Schemes in place and terms and conditions they would typically turn to, in our experience many traditional schemes have been little used and do now need considerable revision to ensure they are fit for this newly intended purpose.
The reason a Fees in Advance Scheme may offer an interim solution to a possible change in VAT status for schools, is due to the point at which VAT becomes payable to HMRC (ie 'tax point')
For VAT purposes, the 'tax-point' is the date on which payment is received. Independent schools traditionally invoice parents on a termly basis, with fees being received on or before the start of each term. In addition, schools must have unfettered use of any advance payment of funds in order for the payment to qualify as the 'tax point', which would exclude any school policy where a lump sum is held on behalf of a parent in a separate account.
Effective schemes also need to consider and address the impact of annual fee increases, scholarships or bursary awards, sibling or staff discounts.
An effective Fees in Advance Scheme needs to bring the tax point for several terms' (or years') fees forward to a single payment date, allowing parents to pay these future fees now while schools still benefit from their VAT exempt status, while also considering how fees may fluctuate over the life of the scheme. It should also tie in with your current parent contract and payment terms and there are other considerations to ensure you avoid unwanted consequences of a poorly designed scheme.