Paying private school fees through limited company and VAT

[red_five]

Surprised that this one hasn't been asked already, but I've searched to no avail so here goes.

I understand that it's allowed for a company to pay an employee (or director's) child's private school fees. These are not tax deductible and personal tax is still due. so there isn't an advantage for the employee to do this.

However, if (when) Labour enact their policy of forcing indpendent schools to charge VAT, a VAT registered company can claim back this input tax. The net cost to the business is then the fees without VAT. Is that the cost that the employee pays?

[isleofthorns]

in short, no.

=

Reclaim VAT on business expenses

You can reclaim VAT on items you buy for use in your business if you’re VAT registered. Do this in your VAT return.


If any items are also for personal use, you can only claim the business proportion of the VAT.

[red_five]

If the company pays the school fees on behalf of the director/employee and declares this as a BIK via the P11D, surely this becomes a business expense?

[Dg504]

The benefit value (which the employer reports to hmrc) includes the VAT so no, no loophole

[MustangGT]

As far as I am aware there is no VAT on school fees?

[spikeyhead]

Who's going to break it to MustangGT that it's Labour policy to put VAT on school fees?

[fridaypassion]

It's not now a swift U turn was made.

[MustangGT]

fridaypassion said:

It's not now a swift U turn was made.

Exactly.

[voicey]

MustangGT said:

fridaypassion said:

It's not now a swift U turn was made.

Exactly.

Are you guys saying that Labour have rowed back on their pledge to introduce VAT on private school fees? I really hope this is the case but cannot see any reporting to confirm this.

[MustangGT]

voicey said:

MustangGT said:

fridaypassion said:

It's not now a swift U turn was made.

Exactly.

Are you guys saying that Labour have rowed back on their pledge to introduce VAT on private school fees? I really hope this is the case but cannot see any reporting to confirm this.

Backed down over the effort to remove charitable status, therefore it remains and normal charity VAT rules apply.

[Mrs Fox]

Looks like Labour is back on this and considering retroactive too. Any smart ideas? I was thinking on the BIK route hence finding this blog but the comments were useful and looks like that doesn’t work

[Teddy Lop]

Mrs Fox said:

Looks like Labour is back on this and considering retroactive too. Any smart ideas? I was thinking on the BIK route hence finding this blog but the comments were useful and looks like that doesn’t work

Retroactive. That's sinister.

[Chrisgr31]

What’s been forgotten by the Labour Party is that a huge number of state schools are charities, as the Academies that run them have charitable status.

So this policy will hit them too especially in connection with business rates.

[Cheib]

The retrospective action is in the case of parents paying several years fees in advance. I was told that VAT is due at the time of “supply of goods” so if it was say school fees for 2026 and VAT was due a pre-payment in 2023 wouldn’t negate VAT. Plus there’s every chance they’d put some kind of bespoke legislation in place to catch people that have paid in advance.

[Vixpy1]

https://www.ft.com/content/11e3c349-c1cc-4356-9911...

[Granadier]

Put the children on the payroll, then the school fees can be filed under training costs for employees. Simples

[hidetheelephants]

Granadier said:

Put the children on the payroll, then the school fees can be filed under training costs for employees. Simples

[Eric Mc]

Granadier said:

Put the children on the payroll, then the school fees can be filed under training costs for employees. Simples

If only

[Simpo Two]

Eric Mc said:

Granadier said:

Put the children on the payroll, then the school fees can be filed under training costs for employees. Simples

If only

Reclaim the VAT but go to jail for employing child labour... It's a mad world. Kids need money to pay for phones and to start saving for a house...

[Eric Mc]

It's perfectly legal to employ child labour - provided certain rules are followed.

And putting someone on the payroll doesn't necessarily mean they have to do much in the way of actual work.