The Labour Party has proposed to remove the VAT exemption for private school fees, which has raised questions about how this change would be implemented. Currently, fee-paying and non-fee-paying schools are treated differently under the UK VAT regime. State-administered schools receive government funding and are not considered ‘in business’ for VAT purposes, while private schools are exempt from VAT but cannot recover it. This proposal would mark a significant VAT event as it would be the first major difference in legislation between the UK and EU VAT regimes.
Source Grant Thornton
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