Caution urged as Labour pledges to remove ‘unfair tax breaks’ received by private schools

28 Sep 2023 News

Official portrait of Keir Starmer

Chris McAndrew, CC BY 3.0 , via Wikimedia Commons

Labour has been urged to consider implications of its plan to “remove the unfair tax breaks” received by private schools, but not remove their charitable status.

Many private schools in the UK have charitable status, which means they are able to take advantage of various tax concessions, including the ability to reclaim some VAT in certain circumstances.

These institutions have to generate a meaningful amount of public benefit, though the Charity Commission is not prescriptive about this. 

Last year, Labour leader Sir Keir Starmer said in a speech the party would be removing private schools’ charitable status.

He said the Labour party would use tax money gained by removing private schools’ charitable status to invest in state education if it wins the next general election. 

But a party spokesperson has now said: “Our policy remains. We will remove the unfair tax breaks that private schools benefit from, to fund desperately needed teachers and mental health counselling in every secondary school.

“This doesn't require removing charitable status, however, driving high and rising standards for every child against the backdrop of a broken economy requires political choices. Labour isn't afraid to make them.”

CTG: ‘Implications for a number of special schools operated by charities’

Richard Bray, chair of Charity Tax Group (CTG) told Civil Society: “Whether or not an organisation or type of organisation qualifies for a particular tax relief is a matter for parliament to decide – and the position of educational institutions that are not charities is not a matter for us. 

“However, the blanket removal of the exemption from VAT for education provided by private schools would have serious implications for a number of special schools operated by charities, such as schools for children with special needs and schools for blind children.

“At the very least, any redrafting of the current exemption would need to be very carefully handled to avoid them being inadvertently affected by any change.

“We have always held to the view that all organisations that qualify for charitable status should benefit equally from the reliefs that are available to all charities.

“So, with rates relief, we consider that if some charities are seen as not deserving of that status, the remedy is to amend the law on charitable status, not the law on taxation.”

Editor's Note: The headline, subhead, and introduction of this piece have been edited since publication to provide further clarification.

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