We all know that Labour, if elected, wants to abolish the exemption from VAT on private school fees. There will be some grey areas: when is a nursery a school, what to do about faith schools that accept large donations from parents/grandparents of pupils, what about special needs schools and so on and I've written about some of these issues before. 

Today's FT article highlights the vexed issue of prepayment. HMRC are clear: “Under the normal time of supply rules the receipt of a payment in advance of the basic tax point will always create a tax point.” To subject a payment to VAT before legislation is put before Parliament seems a little premature, and not in keeping with general principles regarding fairness and certainty for taxpayers, i.e. they should know the tax treatment of their transaction when they enter into it. What is meant by the phrase “official announcement” in the quotation below? How far back would the forestalling go? If someone had made an advance payment in 2018 for the entirety of the child's secondary school fees and has one academic year within a change of government is that one year VATable?

Undoubtedly, people will be rushing to make advance payments now but not all advance payments are VAT-motivated; some are due to legacies, grandparents may want to give away money whilst they are alive and the nervous may wish to ensure that they have secured their child's education even if they lose their current well paid job, for example.

Before rushing to make a payment do take investment and tax advice; not only may you not be saving the VAT but there may also be an opportunity cost of using the money in this manner and, if you are a remittance based user, there may be significant tax issues to consider.  

Obviously, if the private school offers your child  a place in their offshore “sister” school you may not need to worry about VAT or remittance…