Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether food for people living at (a) school and (b) home will have VAT payable on it under the VAT guidance published in November 2024 by HMRC.
Answered by James Murray - Exchequer Secretary (HM Treasury)
Since 1 January 2025, all education services and vocational training provided by private schools in the UK for a charge have been subject to VAT at the standard rate of 20 per cent. This also applies to boarding services provided by private schools.
Since the announcement of this policy, HMRC has taken action to support private schools through the change. This includes publishing bespoke guidance, which is available here: Charging and reclaiming VAT on goods and services related to private school fees - GOV.UK.
This guidance explains that whether VAT applies will depend on how schools charge for meals.
If meals are part of a single supply of education or boarding, the meals will have the same VAT liability as the main supply. So, for example, if a private school charges one fee for education or boarding services, and meals are included as part of the ‘package’ covered by those fees, then 20 per cent VAT will normally be charged on that package without splitting it into individual elements with individual liabilities.
Where a school supplies education or boarding and also supplies other elements for a separate fee, such as meals, these will normally be seen as separate supplies. Where meals are supplied separately, the school must determine if it is closely related to the supply of education, in which case it will be exempt, so no VAT should be applied. Generally, meals supplied during the school day will be closely related to education.
Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how much input VAT is forecast to be repayable to private schools for the first quarter that the VAT is levied; how much output VAT is expected to be raised from these schools from these schools in the first quarter; and what the net payment to private schools is for the first quarter of this implementation under the current HMRC interpretation of the guidance.
Answered by James Murray - Exchequer Secretary (HM Treasury)
The Annex to the Government Response to the Technical Note, Government_Response_to_the_Technical_Note_on_Applying_VAT_to_Private_School_Fees_and_Removing_the_Business_Rates_Charitable_Rate_Relief.pdf, sets out the forecast input VAT and calculation of output VAT and net VAT liability resulting from this measure.
VAT revenue overall is recognised in the National Accounts on an accruals basis. As set out in the above Annex, the VAT liability in 2024/25 is time apportioned for the implementation date of 1 January 2025. The actual VAT input tax and output tax reported on VAT returns for any month or quarter will depend on various factors, including the date when schools meet the requirement to register for VAT (if not already registered), and which of the staggered quarterly accounting periods apply to the business.
Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, how much input VAT is forecast to be repayable to private schools for the first quarter that the VAT is levied; how much output VAT is expected to be raised from private schools in the first quarter; and what the net payment is to private schools for the first quarter of this implementation.
Answered by James Murray - Exchequer Secretary (HM Treasury)
The Annex to the Government Response to the Technical Note, Government_Response_to_the_Technical_Note_on_Applying_VAT_to_Private_School_Fees_and_Removing_the_Business_Rates_Charitable_Rate_Relief.pdf, sets out the forecast input VAT and calculation of output VAT and net VAT liability resulting from this measure.
VAT revenue overall is recognised in the National Accounts on an accruals basis. As set out in the above Annex, the VAT liability in 2024/25 is time apportioned for the implementation date of 1 January 2025. The actual VAT input tax and output tax reported on VAT returns for any month or quarter will depend on various factors, including the date when schools meet the requirement to register for VAT (if not already registered), and which of the staggered quarterly accounting periods apply to the business.
Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether she plans to adapt the VAT penalty regime for private schools in the context of the publication of comprehensive guidance by HMRC.
Answered by James Murray - Exchequer Secretary (HM Treasury)
Since 1 January, all education services and vocational training provided by private schools in the UK for a charge have been subject to VAT at the standard rate of 20 per cent. This also applies to boarding services provided by private schools.
Since the announcement on 29 July, HMRC has taken action to support private schools through the change: providing detailed guidance, creating a bespoke mailbox for technical queries, running webinars, and allocating additional resource to process VAT registration applications.
HMRC guidance on VAT penalties and interest is available here: VAT penalties and interest - GOV.UK. This includes guidance that a penalty may be cancelled or amended if the taxpayer has a reasonable excuse. It also explains that the late submission penalty rules do not apply to your first VAT return if you are newly VAT registered.
Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether she plans to introduce leniency provisions for private schools through the initial implementation of VAT.
Answered by James Murray - Exchequer Secretary (HM Treasury)
Since 1 January, all education services and vocational training provided by private schools in the UK for a charge have been subject to VAT at the standard rate of 20 per cent. This also applies to boarding services provided by private schools.
Since the announcement on 29 July, HMRC has taken action to support private schools through the change: providing detailed guidance, creating a bespoke mailbox for technical queries, running webinars, and allocating additional resource to process VAT registration applications.
HMRC guidance on VAT penalties and interest is available here: VAT penalties and interest - GOV.UK. This includes guidance that a penalty may be cancelled or amended if the taxpayer has a reasonable excuse. It also explains that the late submission penalty rules do not apply to your first VAT return if you are newly VAT registered.
Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if HMRC will extend the 30-day challenge period for instances where they disallow VAT.
Answered by James Murray - Exchequer Secretary (HM Treasury)
Taxpayers can challenge certain decisions from HMRC.
For indirect tax, including VAT, HMRC will offer the taxpayer a review in the decision letter. They will have 30 days from the date of the offer to either accept the offer of a review or appeal to the tax tribunal. This is explained in HMRC guidance, available here: Disagree with a tax decision or penalty: Disagree with a tax decision - GOV.UK.
If taxpayers miss the deadline to accept the offer of a review, they will need to provide a reasonable excuse. Further information on what may count as a reasonable excuse is available here: Disagree with a tax decision or penalty: Reasonable excuses - GOV.UK.
If taxpayers want a review but need more time (for example, to gather information to give to the review officer), they can ask HMRC to extend the deadline. They must ask within 30 days of the offer date. Taxpayers cannot get an extension on the deadline to appeal to the tax tribunal.
Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether the forecasts for input VAT reclaimable by private schools are in line with Revenue and Customs Brief 16 (2016) being issued.
Answered by James Murray - Exchequer Secretary (HM Treasury)
Revenue and Customs Brief 16 (2016) clarified that VAT incurred prior to registration can be recovered as input tax, subject to the normal rules. The approach taken to VAT recovery by private schools, including projection of taxable use, is in line with the policy as clarified in the brief.
Asked by: Patrick Spencer (Conservative - Central Suffolk and North Ipswich)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, whether the forecasts for input VAT reclaimable by private schools are in line with Revenue and Customs Brief 16 being issued.
Answered by James Murray - Exchequer Secretary (HM Treasury)
Revenue and Customs Brief 16 (2016) clarified that VAT incurred prior to registration can be recovered as input tax, subject to the normal rules. The approach taken to VAT recovery by private schools, including projection of taxable use, is in line with the policy as clarified in the brief.