UK private schools mount legal case against VAT changes

This week, UK Chancellor Rachel Reeves made good on the Labour Party’s election promise to slap a 20% tax on private school fees as she unveiled her first Autumn Budget on Wednesday afternoon.

To the dismay of the private school sector, the changes will come into effect in January, with experts predicting that fees will shoot up by an average of 10-15% as schools scramble to cushion the financial blow.

And in another obstacle for independent schools, the Budget also revealed that they will no longer benefit from business rates relief from April 2024. Both measures are designed to redistribute cash from the private to state education sectors.

But now, a group representing independent schools in the UK is taking a dramatic step to try and stop the legislation from making its way into law by essentially taking the government’s decision to court.

The Independent Schools Network (ISC) – an umbrella organisation covering seven private school representative groups – announced today that it has joined forces to fight the changes with the “well-respected” human rights barrister and Kings Counsel Lord David Pannick and Paul Luckhurst from Blackstone Chambers and the legal firm Kingsley Napley.

While the specifics of group’s case against the VAT changes remain unclear, the ISC said it will “centre around breaches of the European Convention on Human Rights and the Human Rights Act 1998”.

It noted that its case will be “separate” from other legal challenges to the plans – including cases from three faith schools – although the ISC will be “liaising with these other third-party groups”, it said.  

The Treasury is quoted by BBC News as refusing to comment on potential legal matters.
 
Julie Robinson, CEO of ISC, said: “This is a decision that has not been taken lightly and has been under consideration for many months. At all points throughout this debate, our focus has been on the children in our schools who would be negatively impacted by this policy.

“This focus remains and we will be defending the rights of families who have chosen independent education, but who may no longer be able to do so as a direct result of an unprecedented education tax.”

Some stakeholders have noted the government’s determination to push through the changes without, it seems, considering how they could be implemented in a smoother way.

There are ways in which the policy has been implemented that could have been less punitive to independent schools
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“The fact that the ISC is taking this action is an indication of how problematic this policy is for the independent school sector. There are ways in which the policy has been implemented that could have been less punitive to independent schools and the families who send their children to such schools, such as implementing the measure to align with the academic year or staging the VAT charges over time,” said Robert Lewis, a partner at the law firm Mishcon de Reya.

“That said, challenges to primary legislation are extremely difficult, particularly a Finance Act in relation to a policy that was in the government’s manifesto and heavily trailed before the election,” he continued.

Other organisations have pointed out the potential impact the legislation will have on expat and international families and in turn the international education sector.

“Removing the VAT exemption for private schools in the UK will likely have a huge impact on expat communities, particularly those with children in international schools,” said Virginie Faucon, Global Head of Marketing at AXA – Global Healthcare.

She continued: “Without VAT exemption, many international schools will have no other choice but to pass at least some of the increased costs on to parents. These cost increases may not be covered as part of an expat worker’s relocation package, meaning they’ll either have to negotiate for a higher allowance from their employer or cover the costs themselves.

“Where neither of these are an option, we may see expat families removing their children from international schools. Not only is this tremendously disruptive for the pupil, but it could put many UK schools into financial hardship.”