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The Labour Party secure a historic landslide at the 2024 General Election. What’s next for Independent Schools?

by Berthold Bauer on July 5, 2024

When will manifesto pledges take effect?

The formalities are underway to install the new Prime Minister on Friday 5 July, but turning manifesto pledges into Legislation will take longer.

We know that one of Labour’s key pledges was to ‘end the VAT exemption…for private schools’ by applying VAT to School fees.  There have been mixed messages in the media about when the policy will take effect, we won’t have certainty until more details are released.  However, changing VAT legislation takes time, and at BBVAT, we expect this policy won’t be implemented immediately.

What can Independent Schools do to prepare?

Some Independent Schools will already be VAT registered, and will have systems in place to deal with the additional administrative burden that comes along with that.

Most of the Independent Schools we’ve spoken to, aren’t.  Whilst we don’t know exactly when you’ll need to start to charge VAT, there are things your School can do to get ready:

  1. Undertake a review of your activities to understand which of your income streams you may have to charge VAT on. By way of example – kindergarten/nursery fees; uniform; transport; etc.
  2. Check your contract or other terms and conditions – do they allow you to charge VAT? Or are fees stated inclusive of VAT?
  3. VAT Accounting:
    • Identify the VAT amount when entering transactions on your accounting software i.e. split the costs net, VAT and gross. This will allow you to more accurately estimate the amount of VAT the School incurs and will help you understand the financial impact of the policy more accurately. When you need to be VAT registered this exercise will be obligatory, but will support the calculations you need to undertake to recover VAT on costs, so it is a good habit to get into ASAP.
    • Readiness for Making Tax Digital (‘MTD’) – there’s a misconception that this is just about software – it’s not. Whilst a VAT registered organisation will need to submit using ‘functional compatible software’ it’s about record keeping generally – ensuring everything feeding into the VAT return has a digital record, minimising the level of human intervention (use of journals, etc) and making adjustments in an MTD compliant way through digital links.
    • Schools that are generating exempt income will be partly exempt – what Partial Exemption method will you adopt? Do you have a template to calculate VAT recovery on costs?
    • Are there any items that will fall under the Capital Goods Scheme for VAT? You will need to put processes in place to monitor ‘use’ of qualifying assets.
  4. Understanding the rules – does your Team know what needs to be shown on a VAT invoice, and under what circumstances a VAT invoice needs to be issued? Are they clear on what evidence you need to be able to recover VAT? It may be necessary to provide VAT training if your staff haven’t prepared VAT returns before, or need a refresher on the basics or more intricate rules for Schools.

How can BBVAT help?

We know that this is a time of uncertainty for Independent Schools, and we are here to support you. We can:

  • Develop a bespoke Roadmap setting out the School’s VAT obligations, bespoke to your School’s circumstances and needs;
  • Undertake a cost/benefit analysis of the policy so that your Governing team understand the likely financial impact of the incoming policy;
  • Review the activities of the School and give a view as to whether there are opportunities to make VAT savings or efficiencies;
  • Provide bespoke training for your finance team to get them ready for VAT registration;
  • Support your team with your VAT compliance obligations, with as much or as little support as you need.

 

We have a team of VAT experts with significant experience in advising Independent Schools, including some of the larger Schools to those of a more modest size, as well as those specialising in SEN offerings.  We know that each School has its own concerns and we provide bespoke advice and support that cater to those, rather than a one-size-fits-all approach.

Should you wish to organize a no obligation call with one of our experts, please contact us at info@bbvat.co.uk or use our free helpline here.

Berthold BauerThe Labour Party secure a historic landslide at the 2024 General Election. What’s next for Independent Schools?

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