Independent schools will not have to charge VAT on refund arrangements they
offer to parents, following a High Court ruling.
Many schools offer parents a right to a refund of fees if their child is ill
or otherwise unable to attend school, but parents must pay for the privilege,
typically 1.5% of fees.
The taxman decided in 2005 that such payments are not VAT-exempt in the way
that education services usually are.
The taxman said there were two supplies of services, while Birkdale said the
payments were in fact just part of a single supply, of education services.
‘It is a measure of the artificiality of the Crown’s case that it has to
characterise the Scheme as involving a supply of the entitlement to the refund
of fees in prescribed circumstances. I do not believe that anybody would ever
have dreamed of describing the Scheme in those terms except for the purposes of
a VAT appeal’ the Honourable Mr Justice Henderson said.
He ruled that the arrangement was in fact part of a single supply of
The school will avoid a £20,000 tax bill as a result of the case.
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