Parents who prepaid school fees may still owe VAT, say experts

Money saved using schemes to avoid paying VAT on private school fees could be clawed back by the government, tax experts have said, after it was revealed the schemes had raised more than £500m.

- Richard Adams

Analysis by the Daily Telegraph found the UK's wealthiest private schools took in £500m last year through "fee in advance" schemes. Parents who paid before the official announcement that VAT would be added to school fees hoped to avoid paying the extra 20% applied from January this year.

But tax experts who spoke to the Guardian said HM Revenue and Customs (HMRC) would scrutinise the schemes to check if they included specific details such as set prices, without which parents could be vulnerable to VAT being demanded years into the future.

The result could see some of England's most famous schools, such as Winchester and Eton, locked in legal battles with the government.

Dan Neidle, a tax lawyer and founder of Tax Policy Associates, said many schools used the fee in advance schemes "like a deposit", meaning parents deposited a lump sum with the school, which then deducted each year's fees, allowing it to raise fees when needed.