What does the recent High Court’s VAT ruling mean for independent Schools?

What was the legal basis of the claim?

The group of parents and Private Schools sought to overturn the government’s VAT on School fees policy on the grounds that it:

• infringed upon human rights; and
• disproportionately affected families choosing independent education for reasons such as special educational needs, religious beliefs, or safeguarding concerns.

What did the High Court say?

The High Court firmly rejected these arguments. The judges ruled that the European Convention on Human Rights does not guarantee a right to pay School fees at a particular level, nor does it obligate the state to subsidise private education through tax exemptions.

The court emphasized that Independent School fees are “subject to market forces” and that parents retain the option to avoid VAT by choosing state education or home-Schooling. This position underscores the government’s stance that VAT on School fees is a fiscal measure rather than a discriminatory policy.

What does this mean for independent Schools?

The implications are profound.

The introduction of VAT on school fees could lead to increased financial pressure on families, a potential decline in enrolment numbers, and broader operational challenges. Some Schools may be forced to consider restructuring, mergers, or even closure (like Queen Margaret’s School for Girls), if they are unable to absorb or offset the additional costs.

Our Head of Real Estate, Alex Hutchings, previously shared some practical tips private Schools can put in place to unlock hidden value in their estate and/or diversify income, which you can read here: Unlocking hidden value and diversifying income in independent education.

In addition, Independent Schools could also consider steps to assess their financial resilience and legal exposure, including:

• Reviewing fee structures and VAT implications to ensure compliance and transparency, including making sure that income which is subject to VAT (and income which is not) has been correctly identified.
• Engaging with parents and stakeholders to communicate changes and manage expectations.
• Exploring charitable status (if you do not already have this), or if you do, revisiting your charitable objectives to ensure alignment with public benefit expectations. Our Corporate & Commercial team wrote about Choosing the right structure for your charity last year.
• Seeking legal advice on restructuring, mergers, or collaborative models that may offer greater sustainability.

We are committed to supporting our clients in the Education sector in navigating these challenging times. If you would like to know more about any points discussed in this article, or linked articles above, please get in touch.