Value Added Tax
Registration threshold
The VAT registration and deregistration thresholds increased to £90,000 and £88,000 with effect from 1 April 2024. The March 2024 Budget stated that they will be again frozen at these new levels, but it does not say for how long. No further details have been given in October.
Private school fees
Labour made a manifesto pledge to charge VAT on private school fees; it was expected, up to the election, that this would take effect in September 2025, at the beginning of an academic year. However, at the end of July it was announced that the charge would apply from the beginning of January 2025. People running schools and professional bodies have protested that this imposes a very tight timescale on the implementation of a complex set of rules on a group of businesses that have never previously had to be concerned with VAT; nevertheless, the Chancellor has confirmed that the new rules will not be delayed.
Every private school should be taking advice on how to deal with VAT. The boundaries between what is chargeable and what remains exempt are not straightforward; the rules on the recovery of input tax on expenditure are particularly difficult for ‘partially exempt’ businesses; and the school has to make sure it has registered with HMRC at the right time, and has the systems in place to record and account for the unfamiliar tax correctly.
Private hire vehicles
The VAT treatment of private hire vehicles has been thrown into doubt by several court decisions. The government ran a consultation in 2024 to understand the impact of the decision, and is considering the responses. In the meantime, further tax cases are due to be heard in the tax tribunals. Anyone running a taxi firm should pay close attention to the outcomes.