Fees 2024-25

From 1 January 2025, all education and boarding services provided by an independent school will be subject to VAT at the standard rate of 20%. Therefore, VAT on school fees commences from the Spring 2025 term. Below are answers to some questions that we expect parents will have. We will update the version every few days over the next few weeks, as further questions arise. Please send questions to:

 vatquery@cheltenhamcollege.org

You will be able to see the release date and the version, if you wish to keep up with the questions that people may be asking.

If you have paid Fees in Advance (FIA), please see questions 9 and 10.

For the remainder of 2024-25, the overall impact of VAT on your fee for the Spring and Summer Terms, compared to Autumn term 2024, will be a 14.8% increase. The reason that your fee rate is not increasing by 20% is because we will be able to reclaim some of our Input VAT (on purchases) and efficiencies we are making within the College.

Please note the presentation of your bill will be the net fee, as per the agreed fee rates for 2024/25, and as per your Autumn term bill. There will be a new line ‘College 24/25 discount at 4.33%’ applied to your bill to reduce the VAT impact on your total bill. Please see Q5 for a detailed explanation.

Some schools are passing on the full 20%, whilst others are absorbing the entire impact of VAT. However, many schools are passing on between 10-15%.  Each school has its own individual set of circumstances.

Cheltenham College has revised 2024-25 fees based on a  commitment of supporting parents alongside balancing what we can afford. Many factors have been considered, including predicting our ability to reclaim Input VAT, opportunities for recovery of VAT under the Capital Goods Scheme, changes to our VAT partial exemption status, and the loss of Charitable Business Rate Relief with effect from 1 April 2025.

We have also commenced a programme of cost efficiencies, which, in additional to absorbing some of the VAT impact, will be necessary due to the other implications of the Autumn Budget 2024. In addition, we are required by our bank to meet certain covenants of operating surplus to debt.

With regards to fees with effect from September 2025, we will endeavour to shield parents from significant increases, whilst navigating the impacts from the Autumn Budget 2024 including significantly increased Employers National Insurance costs.

The Capital Goods Scheme will enable us to claim back a proportion of VAT on major projects, and this is a factor in us being able to absorb some of the VAT.  However, the College faces the loss of Business Rate Relief from April 2025, and the cost of this far exceeds any benefits the Capital Goods Scheme (CGS) will deliver. Our ability to reclaim VAT under CGS recovery will also diminish over time.

For nursery classes provided by independent schools, only “classes made up wholly of children below compulsory school age remain exempt from VAT”. Therefore, only the fees for year groups prior to Reception are exempt from VAT. Fees for year groups starting from and including Reception will be subject to VAT from 1 January 2025.

Below is the worked example for a Spring 2025 term bill for a Fifth Form boarder:

Explanation of bill:

1. 1. The fee exclusive of VAT will appear at the top of your bill, as previously.
2. 2. Any eligible discounts (scholarships, bursaries, service discounts, etc) will then be deducted.
3. 3. Any additional charges or supplements to the bill (boarding supplements, insurance) will then be added. If none apply, this will not appear on the bill i.e. in the above example, it would not have appeared on the bill.
4. 4. This creates your ‘Net Taxable Fee’ value on which we have applied a new discount.
5. 5. You will see the new discount line ‘College 24/25 discount at 4.33%’ on your bill. A discount of 4.33% has been applied to your ‘net taxable fee’ value, after all other discounts, to ensure your fee bill total increase is maintained at 14.8%. Please see comparison above against Autumn Term 2024 bill.
6. 6. Following the 4.33% discount, the taxable fee is finalised on which 20% VAT is charged.
7. 7. VAT is calculated at 20%, and added to create the Total Fee Payable

When we wrote to parents in the Autumn, College undertook to absorb some of the impact of VAT, and made the commitment that we would not pass on 20% VAT, but restrict the increase felt by parents to 14.8% for the remainder of 2024/25.

We have not reduced our 2024/25 core fee rates, on which VAT is being applied.

To restrict the increase to 14.8%, a discretionary discount (4.33%) has been created for 2024/25 which applies only to the value of the fee attracting VAT.

The value of the fee attracting VAT will reduce in the following situations:

• Where College has agreed fee discounts, such as scholarships and bursaries
• Where parents have paid fees in advance under a formal FIA agreement before the statutory deadline

We have therefore applied the 4.33% discount rate to the sum on which VAT is payable (the NET SUM), and have excluded from the discount those components which do not attract VAT.

Our ability to reclaim VAT on our costs is directly affected by the amount of income which attracts VAT, hence the rationale for only passing on the VAT saving to components of the fee that are subject to VAT.

VAT will not apply for extras charges incurred during the Autumn term, which are due to be billed in January 2025.

For subsequent Spring term 2025 extras billing, many extras will attract VAT, as per the legislation.  For example, 20% will be added to services supplied by College, including Music and Lamda lessons, Learning Support, Additional English, and most after school clubs that have any coached or taught component. Late pick up in Prep will not attract VAT.

School trips are treated under different legislation, with VAT only being payable on the surplus from a trip (we do not make any surpluses from trips).

The original guidance suggested that we would be able to exempt certain elements of our total fee package, for example pupil lunches and welfare services, as this appeared the case when the first announcement was made on 29 July 2024. However, since the Autumn Budget 24 announcement on 30 October 2024 further clarification has confirmed that where VAT at 20% is being applied to the ‘single supply of private education’, everything directly associated with that supply would be taxed at the same rate.

Cheltenham College offers an education package, and as such the full fee constitutes a taxable supply.

Information only applicable to parents who have existing Fees in Advance Agreements (FIAs)

It will depend on how and when the payment was made.

The advice from our tax advisors, and from the Independent Schools Bursars’ Association, is that FIA schemes that are longstanding and properly constructed will enable those who made payments under this scheme for three terms or more, prior to 29 July 2024, for fees due from 1 January 2025, to be treated as Exempt supplies on the amounts paid under the agreement schedule.

The existence of a formal FIA agreement is critical to meet these criteria.

From 1 January 2025, any shortfall between a term’s fee and the fees paid in advance (FIA) will be taxable at 20%, as will extras charges which are billed separately.

Information only applicable to parents who have existing Fees in Advance Agreements (FIAs)

Below is the worked example for a Spring 2025 term bill for a day boarding pupil.

Please note, there will be a four extra lines on your bill (see 5 and 6 below*). These are created by the billing software, and are unavoidable, as your fee is more complex, consisting of both exempt and taxable supplies.

Explanation of bill:

1. 1. The fee exclusive of VAT will appear at the top of your bill, as previously.
2. 2. Any eligible discounts (scholarships, bursaries, service discounts, etc) will then be deducted.
3. 3. Any additional charges or supplements to the bill (boarding supplements, insurance) will then be added. If none apply, this will not appear on the bill. In this case the day boarding supplement has been added.
4. 4. The amount paid under a formal FIA agreement for the Spring term 2025 (and onwards) is treated as an Exempt element of the total fee, and therefore deducted.
5. 5. This creates your ‘Net Taxable Fee’ value on which we have applied a new discount (6).*Two lines are shown on the face of your bill as these are the adjustments necessary within our billing software to identify the taxable FIA shortfall of the total fee (i.e. following all fee discounts and your FIA Exempt deduction). The first line identifies the shortfall, and this appears as a negative value. The second line creates the taxable shortfall value labelled as ‘Fees (Standard Rated) on which discount (6) is applied. We appreciate this may seem confusing, but unfortunately, our billing software is unable to simplify these adjustments into one line.
6. 6. You will see the new discount line ‘College 24/25 discount at 4.33%’ on your bill. A discount of 4.33% has been applied to your ‘Net Taxable Fee’ value, after all other discounts and your FIA deduction, to ensure your fee bill total increase is maintained at 14.8%. Please see comparison above against Autumn Term 2024 bill. *Two lines are shown on the face of your bill. Please disregard the first line which will always be £0.00, as this is picking up the FIA Exempt element of the fee, on which the College 24/25 discount is not applied. The second line shows the actual discount being applied against the taxable element of the fee. We appreciate that this may seem confusing, however we cannot remove this line from the automatically generated bills our billing software creates.
7. 7. Following the 4.33% discount, the taxable fee is finalised on which 20% VAT is charged.
8. 8. VAT is calculated at 20%, and added to create the Total Fee Payable