Labour Party UK has confirmed that it will not revoke the charitable status of private schools if it comes to power. The party had previously suggested that removing their charitable status would allow them to charge private schools value-added tax and business rates, potentially bringing in £1.7bn in tax revenues. However, Labour party officials now state that they can achieve the same tax obligations by mandating that private schools pay VAT and business rates, without the need to change the law or revoke charitable status. This clarification aims to end confusion about Labour’s stance on taxing private schools and ensures that the schools can continue to enjoy tax exemptions on donations, gifts, and capital gains tax.
In response to the clarification, some independent schools are likely to welcome Labour’s softened position. Charities, including private schools, benefit from tax exemptions, and they would now be able to retain these benefits in the event of a Labour election victory. While it had been clear in private conversations with Labour that removing charitable status was not their intention, the Institute for Fiscal Studies acknowledges that the focus on removing VAT and business rates exemptions is not surprising. This approach can be implemented quickly and is the most valuable in terms of raising tax revenues, unlike removing charitable tax status, which would be a lengthy and complicated process.
Labour’s education mission document outlines its plan to impose VAT on private schools and end their business rates exemption, without explicitly mentioning the revocation of charitable status. The confusion surrounding Labour’s position has arisen from comments made by senior party members. This clarification aims to provide a clear understanding of Labour’s policy on taxing private schools and its commitment to fund teachers and mental health counseling in every secondary school by removing unfair tax breaks enjoyed by private schools, without requiring the removal of their charitable status.