Some of the wealthiest private schools in the UK, including Eton, may have found a way to benefit from new VAT rules, potentially costing taxpayers billions of pounds. A document released by HMRC on Thursday reveals that once independent schools are registered for VAT, they can reclaim tax paid on capital projects—such as buildings and land acquisition—for up to 10 years.
This tax rebate will be distributed over the next decade, depending on the completion dates of the projects, with wealthier schools set to benefit more than smaller institutions.
According to The Observer, the move has raised concerns about private schools exploiting the system. One senior figure in the independent school sector stated, “The higher echelons of the independent school sector are staying very quiet, rubbing their hands in the hope that this is implemented as soon as possible.”
Reports suggest that elite schools like Eton are planning to pass on the full 20 per cent VAT increase to parents. At the same time, these institutions will be able to reclaim VAT on operating costs and large-scale capital projects.
The source added: “In short, the taxpayer will now be funding 20 per cent of their running costs and capital projects. It is a windfall gain to the privileged independent schools at the expense of the taxpayer.”
Labour’s plan, which is based on an Institute for Fiscal Studies (IFS) study, seems to have overlooked this provision in the standard VAT rules, leading to concerns that HMRC could be left with a significant financial burden due to VAT claims by these schools.
This oversight could lead to major payouts, further benefiting wealthy institutions and putting additional pressure on public finances.
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