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.

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.

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.

Question to the Department for Education:

To ask His Majesty's Government what data they have on the number of international students studying in English universities who attended English independent schools, and what assessment they have made of any potential loss of income for English universities as a result of levying VAT on independent school fees.

Answered by Baroness Smith of Malvern - Minister of State (Education)

The department does hold some information on the type of school attended by students prior to entering higher education in the UK. However, this is only mandatory for UK domiciled students and is optional for providers to complete for international students. Therefore, the information held by the department is of unreliable quality and Higher Education Statistics Agency publish this information for UK domiciled students only.

HM Treasury will publish a Tax Information and Impact Note that considers the impact of these tax changes at Budget on 30 October.

Question to the Department for Education:

To ask His Majesty's Government how many international students are currently studying in English universities, and what is the total amount these pupils will pay in tuition fees this academic year.

Answered by Baroness Smith of Malvern - Minister of State (Education)

The Higher Education Statistics Agency is responsible for collecting and publishing data about UK higher education (HE), including on international student numbers and tuition fee income.

In the 2022/23 academic year there were 630,005 international students studying at English universities and other HE providers, generating a total tuition fee income of £10.1 billion.

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.

Found: Email from Lord Hain, Lord Lexden, Lord Dodds, Lord Empey and Baroness O'Loan to Lord Gardiner of Kimble