VAT shock for schools

PROPOSED LAW: WILL BE FORCED TO DEREGISTER AND FACE HUGE LIABILITIES

- Amanda Visser

A significant number of schools currently registered for value-added tax (VAT) will be forced to deregister from next year. That's if a proposal in the draft Taxation Laws Amendment Bill is passed into law.

This policy decision will have massive financial implications for schools in the short term, possibly depleting cash reserves and having substantial cash flow implications. It is likely to have a knock-on effect on school fees in future.

Educational services have always been exempt from VAT, but only if the services were supplied in return for school fees, tuition fees or payment for lodging.

However, services were never exempt if the consideration was not in the form of school fees, tuition fees, or payments for lodging.

National Treasury announced that the proposed amendment will come into effect on 1 January, 2026. The policy intent was "always" to exclude schools from the VAT net, it said in its reason for the change.

WTS Renmere's VAT specialist Duane Shipp said many schools with commercial activities registered for VAT if they were above the R1 million registration threshold.

These activities include the supply of school uniforms or making available the sports facilities, school hall, swimming pool and hostels to private clubs or individuals.