Weekly VAT News

Removal of VAT exemption for private school fees – draft legislation

HMRC have published Revenue and Customs Brief 8 (2024) on the removal of VAT exemption for private school fees and boarding fees. HM Treasury have also published a technical note, draft legislation, and an explanatory note. As of 1 January 2025, education services and vocational training supplied by a private school or a “connected person” for consideration will be subject to VAT at the standard rate of 20%. The standard rate will also apply to boarding services that are “closely related” to such supplies. Where children with special educational needs are placed in private schools because their needs cannot be met in the state sector, with funding by a local authority or other public body, the funder will be compensated for the VAT incurred. Fees paid on or after 29 July 2024 for education provided after 1 January 2025 will be subject to VAT at the standard rate. The RCB states that “School fees paid before 29 July 2024 will follow the VAT treatment in force at the time of the normal tax point for these supplies, where the fee rate for the relevant term has been set and was known at the time of payment.” The technical note refers to schemes enabling the pre-payment of fees, and states that in many cases “the structure of these schemes means that the tax point has not yet been passed” and that “HMRC stands ready to challenge the validity of such payments and will seek to collect VAT on those fees where it is due.” Schools required to VAT register will be able to do so from 30 October 2024, and HMRC will be providing further guidance. Submissions on the technical note, which includes a number of questions for consultation, and the draft legislation close on 15 September 2024. (Contact: Laurie Pay)

Corporate Criminal Offences – HMRC update

HMRC have updated their statistics on compliance activities in relation to Corporate Criminal Offences (CCO) for the failure to prevent the facilitation of tax evasion. As of 30 June 2024, HMRC had 11 live CCO investigations, with no charging decisions yet made, and a further 28 identified cases were under review as to whether they should proceed to an investigation. The cases identified span 11 business sectors, including software providers, labour provision, accountancy and legal services, and transport. To date, HMRC have reviewed and rejected an additional 101 cases. HMRC note that some of their investigations have led to satisfactory explanations that did not establish deliberate facilitation, but have led to other tax and regulatory offences being pursued. (Contact: Rob Holland)

Publication of permission to appeal refusal decisions by the Upper Tribunal

On 22 July 2024, the President of the Upper Tribunal, Tax and Chancery Chamber (The Hon. Mrs Justice Bacon DBE) published an update to the UT’s guidance on the publication of permission to appeal decisions. In a change to current practice, where the UT has held an oral hearing on whether to grant permission to appeal against a First-tier Tribunal decision and decided to refuse permission, the UT will now publish its decision. This change in practice reflects that the decision has been made following a public hearing and represents the final stage in the appeal process. It is also intended to address an imbalance that occurs because public authority bodies (usually HMRC) have knowledge of a wider body of the permission to appeal decisions compared to other parties (private parties and advisers). (Contact: Stephen Yates)