The government has opened a consultation on its plan to scrap tax breaks for fee-charging schools and confirmed it intends to apply VAT to those fees from January. 

The Treasury has published a technical note with information on planned changes and launched a seven-week consultation, which will run until 15 September.

The note confirms that fees paid from yesterday for the term starting in January would be subject to VAT and independent schools in England will have to pay full business rates from April.

Independent schools have not been required to charge VAT on their fees because of an exemption for educational organisations.

About half of England’s independent schools are also registered as charities and as such receive an 80 per cent reduction on business rates.

The consultation asks whether the legislation “inadvertently capture[s] any organisations that this policy does not intend to capture”.

The government’s note reads: “As of 1 January 2025, all education services and vocational training supplied by a private school, or a ‘connected person’, for a charge will be subject to VAT at the standard rate of 20 per cent.  

“Boarding services closely related to such a supply will also be subject to VAT at 20 per cent.”

The document states nurseries would remain exempt, with only the fees of children in the first year of primary in an independent school upwards taxable.

The government said it did not expect fees to go up by 20 per cent as a result of the policy change.

“Rather, the government expects private schools to take steps to minimise fee increases,” the note reads.

On the Third Sector Podcast, Chris Fairbank, director of communications at independent school headteachers’ association The Heads’ Conference, warned that affected schools would have to consider how they allocate their resources. 

“Schools spend a huge amount of money and time on staff, letting out facilities, providing services and all kinds of things to support their charitable aims and objectives and to support local charities, and all this change is going to do is make that work incredibly difficult to maintain and sustain,” he said. 

“But we know there are specific examples of schools up and down the country that have incredibly close ties with charities in their local communities. 

“And we’re not talking about big national charities, but we’re talking about small, community-focused hospices and organisations like that. 

“And the work that those schools do, everything will have to be reconsidered and re-evaluated in light of this new financial environment that they find themselves in.”

But Fairbank also said the assumption that schools would just cut all their public benefit “was perhaps a false one”. 

Julie Robinson, chief executive of the Independent Schools Council, which represents more than 1,400 schools in the UK and overseas, said: “Thousands of children face having their education disrupted as a result of this unprecedented tax.

“It will increase pressure on state schools and on an already-stretched SEND system, as well as on faith provision, on specialist arts education and on military families. 

“The draft legislation was published before consultation with independent schools. 

“We will be working over the coming months to engage the government on the consequences of this policy on schools, families and communities – it remains our belief that the best way to improve education for all is for schools to work together, not to tax education.”