Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government how much revenue they expect to raise by imposing VAT on independent school fees; and how they have calculated that estimate.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
Applying VAT to private school fees will raise £1.7 billion a year by 2029/30, rising from £1.5 billion in the first full year of the policy.
The Government published the policy costing for this change at the Budget, including setting out the assumptions and methodology.
The independent Office for Budget Responsibility (OBR) has certified the costing, including the assumptions and methodology.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what assessment they have made of the impact of VAT on independent school fees on small independent faith schools, particularly those educating the children of Muslim families.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
From 1 January 2025, the 20% standard rate of VAT will apply to all education services, vocational training, and boarding services provided by private schools for a charge. This will apply to any fees charged after 29 July 2024 for terms starting after 1 January 2025.
The government has thoroughly assessed the impacts of the VAT policy on small faith schools, including considering all of the evidence submitted through the consultation process. Based on the evidence provided, it is not apparent that small faith schools will be affected more by this policy than other schools.
The government closely examined proposals put forward for how small faith schools could be carved out of the policy, concluded that any carve out would reduce the amount of revenue raised from this policy, be unfair to those schools with fees just above the threshold, and would create many tax avoidance opportunities that would be difficult for HMRC to police.
Furthermore, it is the government’s position that state education is suitable for children of all faiths. All children of compulsory school age are entitled to a state-funded school place if they need one, and all schools are required to follow the Equality Act.
Further detail can be found in the summary responses published on GOV.UK.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what plans they have to ensure that the HMRC guidance of 10 October on the steps that steps independent schools should take to pay VAT on their fees with effect from 1 January 2025 is reissued to correct any errors in, and improve the drafting of, that guidance.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
HMRC has put in place a number of measures to ensure schools can be ready for the introduction of VAT on private school fees and remains committed to supporting schools with their new VAT obligations, including by providing bespoke guidance and webinars.
We do not recognise reports that HMRC's guidance contains errors. In publishing its guidance, HMRC has addressed areas of uncertainty and will provide further clarification in guidance if that is required. As with all guidance, HMRC will keep the guidance for private schools under review and continue to update it in light of further feedback we receive during our ongoing engagement with the sector – for example, any common questions that arise during the webinars. Following the Budget, an update to the guidance has now been published to reflect the final policy design and legislation.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government how they plan to apportion the revenue raised by charging VAT on school fees between the recruitment of more teachers, the creation of more nurseries and the establishment of breakfast clubs in all primary schools.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
From 1 January 2025, the 20% standard rate of VAT will apply to all education services, vocational training, and boarding services provided by private schools for a charge.
It will be a commercial decision for individual schools how they fund this additional cost. Charging VAT at the standard rate of 20% does not mean that schools must increase fees by 20%.
Schools can reclaim VAT paid on inputs and reduce costs to minimise the extent to which they need to increase fees. On average, the government expects fees to rise by 10%. After recovery of VAT on their costs, on average the government expects schools to be liable for VAT amounting to approximately 15% of fee income.
The government will use this funding to help deliver its commitments relating to education and young people. In the Budget the government announced a £2.3 billion increase to the core schools budget for financial year 2025/26, increasing per pupil funding in real terms.
Further detail on this can be found in the Tax Information and Impacts Note (TIIN) published alongside the Budget.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government what estimate they have made of the number of independent schools which will absorb wholly or in part their VAT charge from 1 January 2025 rather than increasing their fees.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
From 1 January 2025, the 20% standard rate of VAT will apply to all education services, vocational training, and boarding services provided by private schools for a charge.
It will be a commercial decision for individual schools how they fund this additional cost. Charging VAT at the standard rate of 20% does not mean that schools must increase fees by 20%.
Schools can reclaim VAT paid on inputs and reduce costs to minimise the extent to which they need to increase fees. On average, the government expects fees to rise by 10%. After recovery of VAT on their costs, on average the government expects schools to be liable for VAT amounting to approximately 15% of fee income.
The government will use this funding to help deliver its commitments relating to education and young people. In the Budget the government announced a £2.3 billion increase to the core schools budget for financial year 2025/26, increasing per pupil funding in real terms.
Further detail on this can be found in the Tax Information and Impacts Note (TIIN) published alongside the Budget.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask His Majesty's Government whether they have carried out an impact assessment on their proposal to put VAT on independent school fees; and if so, whether they will publish it.
Answered by Lord Livermore - Financial Secretary (HM Treasury)
On 29 July, the Government announced that, as of 1 January 2025, all education services and vocational training provided by a private school in the UK for a charge will be subject to VAT at the standard rate of 20 per cent.
This will secure additional funding to help deliver the Government’s commitments relating to education and young people, including opening 3,000 new nurseries, rolling out breakfast clubs to all primary schools, and recruiting 6,500 new teachers.
Following scrutiny of the Government's costings by the independent Office for Budget Responsibility (OBR), details of the Government’s assessment of the expected impacts of these policy changes will be published at the Budget on 30 October in the usual way.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what plans they have to remove the application of VAT to sales of audiobooks.
Answered by Lord Agnew of Oulton
An extension of the zero rate of VAT has been introduced to provide consistency in approach between certain physical and digital publications.
Audiobooks are already taxed consistently at the standard rate in both physical and digital format.
There are no current plans to extend the VAT zero rate to audiobooks. However, the Government keeps all taxes under review, including VAT.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what discussions they have had with insurance companies about whether independent schools, particularly small independent schools, are able to obtain compensation for business interruption as a result of the COVID-19 emergency measures.
Answered by Lord Agnew of Oulton
The Government is in continual dialogue with the insurance sector about its contribution to handling this unprecedented situation. It is also working closely with these educational institutions to understand the financial implications of COVID-19 and to provide financial support where it is needed and is appropriate.
For those businesses and charities which have an appropriate policy that covers pandemics and unspecified notifiable diseases, including independent schools, the Government’s social distancing advice of both 16 and 20 March is sufficient to allow them to make a claim against their insurance, provided the other terms and conditions in their policy are met.
The FCA’s rules require insurers to handle claims fairly and promptly; provide reasonable guidance to help a policyholder make a claim, and appropriate information on its progress; not reject a claim unreasonably; and settle claims promptly once settlement terms are agreed.
Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. However, most businesses and charities have not purchased insurance that covers losses from COVID-19.
The Government recognises that businesses and charities who do not have appropriate insurance cover will require support from elsewhere. As such, they should explore the full package of support set out by the Chancellor in the Budget, on 17 March, and on 20 March.
As the Chancellor announced on Tuesday 17 March, the Government will do whatever it takes to get our nation through the impacts of COVID-19.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government, further to the Written Answer by Lord Bates on 9 April (HL14826), what considerations led them to set aside their proposal to establish a working party on the fiscal disadvantages experienced by sibling couples.
Answered by Lord Young of Cookham
The Government keeps all taxes under review. The Office of Tax Simplification are reviewing inheritance tax and will make recommendations that the Government will consider.
The inheritance tax treatment of married couples and civil partners reflects their unique legal relationship, and extending this treatment to siblings would incur an Exchequer cost.
Asked by: Lord Lexden (Conservative - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government, further to the answer by Lord Bates on 21 March (HL Deb, col 1526), when the cross-departmental working party to consider the fiscal disadvantages experienced by sibling couples will be established; what will be its terms of reference; and when its report will be completed and published.
Answered by Lord Bates
The Government will consider the issue of siblings and inheritance tax through the Office of Tax Simplification’s review of inheritance tax. Their report is due to be published in spring, and their recommendations will be carefully considered.