The Risk of Removal of the Benefits of Charitable Status

The ISC and its associations, with support from professional advisers including VWV, has sought to keep school leaders appraised of the risks, raising awareness at seminars and conferences, in newsletters and, in December 2022, issuing practical guidance on the Political and Financial Threats.

Requiring VAT to be charged on school fees would affect every independent school, be they owned privately or owned by charities and the removal of the tax benefits of charitable status would further impact charities that own and operate independent schools.

The likelihood of the changes occurring turns on whether, at the next general election, Labour are likely to be elected to power (to assess the likelihood of this, refer to the latest opinion polls); and whether their policy is likely to be enacted as new law.

What Can Schools Do Now?

Schools should continue to work together to support the ISC and its associations in their efforts to continue to lobby on behalf of the sector.

Individually, we recommend that, in addition to adding to the risk register and understanding the potential financial impact, schools should:

• be clear on their websites and in their Trustees Annual Report as to what public benefit their charity delivers in return for the tax benefits it receives
• run a tight ship financially - build up reserves where possible and understand what it would take for the school to be competitive without the tax benefits
• review and consider the timing and impact of potential tax changes on all aspects of their operations and investments, including any capital projects, proposed mergers or acquisitions of property or other educational businesses
• understand and modernise their constitutions as far as possible to build in flexibility now that may be needed in the future

We are advising a number of schools on what it may be possible to do now to minimise potential future tax liabilities in the context of their constitutions, activities and strategic projects.

If you wish to discuss the issues further and how we can assist, please don't hesitate to contact Barney Northover in our Independent schools team at bnorthover@vwv.co.uk or on 07973 423 081, or alternatively please complete the form below.