Many fee-paying schools run schemes under which parents are entitled to a refund of a proportion of fees if their child is unable to attend school for a certain length of time, because of illness etc. Parents pay a small increase in fees to participate in the scheme.
HM Revenue & Customs (HMRC) has, in recent years, held the view that the payment of the additional amount is a separate supply, for VAT purposes, from the payment of the main fees, and as such is subject to VAT.
The High Court has recently held that the payment of the fees and the additional amount are in respect of a single supply of educational services by the school to the parent, and as result, are exempt from VAT.
Schools which have been asked to account for VAT on the additional fees should now seek a repayment from HMRC.
Please contact Tom Kivlehan or Vaughn Chown for further information.