EDSK - obstacles to adding VAT to independent school fees

If you are supplying a good then the ‘basic tax point’ is usually the date when the customer takes the good(s) away.5 For example, if a customer purchases an item in a shop, the basic tax point would be when the customer leaves the shop with the item. [...] If you are supplying a service such as education, the basic tax point is the date when the service is performed (normally the date when all the work is complete).6 However, under VAT legislation – specifically, Section 6 of the 1994 VAT Act – if a supplier receives a payment before the basic tax point (when the service is delivered), the ‘actual tax point’ becomes the date that the supplier issues. [...] Under their plan, independent schools that started charging VAT in the years after VAT was added to school fees would be able to claim back past VAT payments, but only up to the date at which the new tax on fees came into force.16 This would directly contradict the principles behind the CGS and would essentially mean treating independent schools differently to any other organisation that charges V. [...] Debating the impact of changes to parental behaviour One of the most disputed topics in relation to adding VAT to fees is the question of how many pupils may be forced to leave independent schools due to the fee increases. [...] One headteacher at a grammar school warned that extra competition for places would benefit “private school parents [who] are best placed to be buying the houses right next to the schools.”32 Needless to say, parents having to withdraw their child from an independent school and using the unspent fees to help fund the purchase of a new house in a grammar school area would not generate any VAT revenu.