Paying private school fees through limited company and VAT

[Eric Mc]

isleofthorns said:

speaking to a friend the other day... he's been expensing his son's school fees through his ltd company for the last three years...

spoke to another friend and he's employed his 17yr old son and puts his pay towards paying fees..

in both cases, not a squeak from either their accountants nor the revenue!

IMO, VAT will just be another hurdle for them to overcome / dodge!

It is perfectly possible to use your own limited company to pay for your child's school fees. It would be considered as part of the director's remuneration package and would be taxed under PAYE, most likely as a Benefit in Kind.

Reclaiming VAT on any such fees would be a different matter as it would be very hard pushed to justify the Input VAT reclaim on business grounds.

[JimmyConwayNW]

Eric Mc said:

It is perfectly possible to use your own limited company to pay for your child's school fees. It would be considered as part of the director's remuneration package and would be taxed under PAYE, most likely as a Benefit in Kind.

Reclaiming VAT on any such fees would be a different matter as it would be very hard pushed to justify the Input VAT reclaim on business grounds.

Saves time if they provide wraparound care? Allows the key person in business to be there by dropping off at 7:30 - into office at 8, leave at 5 and use the wraparound care to collect upto 6? Surely if there is vat involved that would be helping the person in much the same way as employing a vat registered contractor to do some simple admin tasks or such like that free up the owners time to work on more pressing things ( like browse PH),

[Eric Mc]

See how far you get with that argument at a VAT Tribunal

[Puzzles]

If HMRC do get the resources promised there will be a few very surprised small businesses owners

[theboss]

Eric Mc said:

It is perfectly possible to use your own limited company to pay for your child's school fees. It would be considered as part of the director's remuneration package and would be taxed under PAYE, most likely as a Benefit in Kind.

Reclaiming VAT on any such fees would be a different matter as it would be very hard pushed to justify the Input VAT reclaim on business grounds.

Ignoring the VAT which is non-reclaimable, is there any advantage in having the school invoice the company and treating as a BIK? Is it just the case that employers NIC and income tax would be payable on the value of the fees?

[fridaypassion]

Hopefully they will just bill it as "training course" Bosh job done

[Eric Mc]

fridaypassion said:

Hopefully they will just bill it as "training course" Bosh job done

That's called "Tax Evasion" and is illegal.

[paulrockliffe]

Eric Mc said:

VAT is never charged on the provision of education to children. It is an exempt activity for VAT purposes. However, schools (both public and state funded) usually engage in other activities which may be subject to VAT if the income from those activities exceed the VAT registration threshold.

Being a registered charity does not exempt an operation from having to register for VAT.

I always thought that the issue was whether public schools should be charged taxes on their profits. Public schools escape tax on their PROFITS because of their charitable status.

Yes, that's an accurate summary, though a Charity doesn't make profits that can be distributed either, so there aren't really profits there to be taxed because the money has to be invested back into the charitable purposes.

Labour seem to have misunderstood that it's not Charitable Status that removes the need to charge VAT. Now reach for your copy of the VAT Act and see if you can work out how amend it so some Education is not Exempt from VAT without causing an unwanted knock-on effects.

[Eric Mc]

There are quite a few educational activities which are subject to VAT already. Most adult orientated courses such as extra mural studies, things like art clases, holiday related courses etc, will have VAT added to their fees.

Essentially, it is basic eduction for children and voational third level education that is "Outside the Scope" of VAT. Note that "Outside the Scope" is not the same as "VAT Exempt" or "Zero Rated for VAT".

Happy reading -

https://www.gov.uk/guidance/vat-on-education-and-v...

[fridaypassion]

Eric Mc said:

That's called "Tax Evasion" and is illegal.

Come on Eric where's your sense of adventure?!

If the kids are destined to work in the business though technically they are training for the job!

I'm only kidding but would be a fun conversation to have with HMRC. If they do bring this change in we can swerve it with our eldest by paying the remaining fees in a oner before it kicked in. My youngest two that would be much more of a challenge although it would save around £30000 over 5 years. In any case I think our little school would unfortunately close so thats a huge risk in paying large fees up front maybe not so much for the bigger, older schools and of course because half the pupils in the expensive private schools are just paid via trust fund the properly wealthy can just pay the fees and save even more VAT of course leaving the burden as ever on the that can least afford it.

[MrJuice]

Eric Mc said:

There are quite a few educational activities which are subject to VAT already. Most adult orientated courses such as extra mural studies, things like art clases, holiday related courses etc, will have VAT added to their fees.

Essentially, it is basic eduction for children and voational third level education that is "Outside the Scope" of VAT. Note that "Outside the Scope" is not the same as "VAT Exempt" or "Zero Rated for VAT".

Happy reading -

https://www.gov.uk/guidance/vat-on-education-and-v...

I know the owner of a multi million pound profit business that sells exam papers for 11+ preparstion. It's all pdf downloads and his material used to be subject to VAT. Until Rishi abolished the VAT on digital downloads during covid