From 1st January 2025, most private school fees became subject to VAT at the standard rate of 20%, following the removal of the VAT exemption for education and boarding services provided by private schools.
In anticipation of this change, some schools offered the option to prepay fees before the legislation took effect, aiming to avoid the additional VAT charge.
HMRC response
HMRC is now investigating whether the advance payments of fees made from 29th July 2024 are caught by the anti-forestalling provisions introduced alongside the VAT measure. The aim is to prevent arrangements designed to avoid VAT.
These provisions state that if a school invoices or receives payment on or after 29th July 2024, but before 30th October 2024 for a term starting on or after 1st January 2025, VAT will be due on the first day of that term.
What schools should do
If your school received any prepayments between 29th July and 30th October 2024, and you’re uncertain about the VAT treatment or liability, we strongly recommend seeking professional advice. HMRC’s anti-forestalling rules are complex and may apply even if payments were made before the legislation formally came into force.
Our team can help you review any potentially contentious income, assess your exposure, and ensure your arrangements are fully compliant with current VAT guidance. Please get in touch if you’d like support navigating this issue.
