Schools urged to review accounting of pre-paid fees

Private schools should review the accounting treatment of pre-paid school fees in order to avoid huge tax charges at a later date according to Daphne Hemingway VAT director at Jerroms Miller. 

Parents and grandparents of schoolchildren have paid an estimated £100m in private school fees ahead of the imposition of 20% VAT on school fees due to come in next year. There is currently a VAT exemption on private school fees which means those making pre-payments will not incur VAT.

Schools need to be aware that this pre-payment may fail to avoid the VAT being applied to the school fees warns Hemingway. Prepaid fees will still be subject to 20% VAT if schools have not understood complex VAT rules. 

She added: ‘Schools have accrued millions in prepayments on the basis that these fees will remain VAT-exempt when the law changes. However without...