New government legislation means that, as of 1 January next year, private schools will have to add 20% VAT (the standard rate) on to the fees they charge for their education and vocational training services.
Private schools will also have to charge 20% VAT on their boarding services. This means of course, that as of next year, parents will have to pay more to send their children to private schools, but it also raises questions about the VAT liabilities of those organisations which provide care, accommodation and education for children with learning difficulties and other special needs.
The placement of many of these children in privately-operated facilities will have been arranged by local authorities and such placements will be fully funded by the local authority which arranged the placement. It is understood that VAT will still be charged on the services provided to these children, and that the new legislation provides for the recovery by local authorities of VAT paid for these services.
The new rules mean that some care providers who also provide education services will now have to register their businesses for VAT. This should mean that in turn, they will be able to recover input VAT paid on their operating costs, along with VAT paid on ongoing capital expenditure with some element of retrospective recovery.
There is also the issue of fees which have been pre-paid prior to 1 January next year. Any received from 29 July this year will also attract VAT.
It is clear that many specialist care providers who also provide education services will need to restructure their contracting arrangements to comply with the new VAT regime and to maximise their tax efficiency.
Kieran Lynch have assisted care providers in contract restructuring for VAT recovery for more than 15 years, returning more than £100 million in net benefits to the sector over that period and are well-placed to assist specialist care providers in reconfiguring their fee arrangements with local authorities to comply with the new VAT requirements.
Thinking about restructuring for VAT recovery? Contact Kieran Lynch on 0114 262 2127.
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