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Labor has confirmed it will not strip UK private schools of their charity status if it comes to power, as it attempts to draw a line under the chaos surrounding its independent education proposals.
Senior members of the party have repeatedly mentioned scrapping private schools’ status as charities and the benefits that would come with it, saying the move would enable them to charge VAT and business tax to the institutions and bring in around £1.7bn in revenue . tax income.
Late last year, Labor leader Sir Keir Starmer called on the government to strip schools of their charitable status. In a speech this summer he said of the party’s policy: “When I said we were going to fund children’s education, I also said it would be funded by removing the charity status of private schools.”
Labor officials now say they will be able to enforce the same tax obligations originally imposed, simply requiring private schools to pay VAT and business tax. This means there is no need to go through the cumbersome process of changing the law to remove their charitable status.
The position, first reported by the i newspaper, will end confusion over how exactly the Labor government intends to impose certain tax responsibilities on private schools.
A party official said lawyers told them the tax could be levied without revoking charitable status.
A party spokesman said: “Our policies remain unchanged. We will scrap the unfair tax breaks that benefit private schools and fund much-needed teachers and mental health counseling in every secondary school.
“This does not require the removal of charitable status,” they added.
Given that charities also enjoy exemptions from donations and gifts, as well as capital gains tax, some independent schools may celebrate a softening of Labour’s stance. If Labor wins the election, they will now be able to retain these.
But a senior figure in the private schools sector told the Financial Times that in private conversations with Labour, it was clear that the party had never intended to remove charity status.
Luke Sibieta of the Institute for Fiscal Studies conducted a study Impactful research Speaking about the likely impact of labor policy, he said it was not “very surprising” to see a focus on removing exemptions from VAT and business rates.
“It can be done quickly, and they are the most valuable tax breaks,” he said. “Removing charitable tax status would be a long and complex process that is unlikely to generate much additional tax revenue.”
Sources close to the party claim Labour’s position has always been to focus only on VAT and business rates, with “charity status” being used as an abbreviation.
Labour’s education mission document states that “VAT will be introduced for private schools and their business rates exemptions will end”, but makes no mention of charitable status.
However, back-and-forth comments from senior members of the party – including shadow education secretary Bridget Philipson – caused confusion.
Svlook
