SNP ministers raised a catalogue of concerns over Labour's VAT raid on private schools

The Scottish Government raised a series of concerns with the Labour government at Westminster over its plans to end the VAT exemption on private school fees, it can be revealed.

SNP ministers publicly support the policy, which comes into effect on Wednesday, but documents released to The Scotsman show how officials demanded multiple amendments to the draft legislation.

One leading figure in the independent schools sector said the papers again underlined how the UK government had taken “no account” of the many differences in the Scottish education system when drawing up the new regulations.

Labour promised to introduce VAT on private school fees in the run-up to Sir Keir Starmer’s election victory in July, with the move expected to raise £1.6billion a year.

Kilgraston School in Perthshire | Google

Polls show the policy is popular, but it has already been linked to the closure of two private schools in Scotland, Kilgraston and Cedars.

Concerns have also been raised about its impact on state schools in areas like Edinburgh, with local primaries and secondaries receiving an increasing number of applications for places from families who can no longer afford to send their children to private schools.

The tax adds 20 per cent to the cost of a private education, although some schools have reduced fees before the addition of VAT, by varying levels, to try to lessen the impact on parents.

It has now emerged that the Scottish Government highlighted a series of problems with the legislation in its response to a UK government consultation.

The response, released under freedom of information (FOI) laws, shows how concerns were raised that grant-aided special schools would be hit with VAT under the plans.

“Scottish Government officials have challenged the inclusion of grant-aided special schools, as in Scots law they are not independent schools,” the document stated.

It added: “There will be schools and institutions captured by this policy in Scotland that are not independent schools and for which there is no alternative state provision.

“There is a clear distinction in Scottish education law between these types of school and that by including grant-aided special schools in particular, where pupils are placed by local authorities and for which there is no alternative state provision, the proposed legislation does not reflect that.”

Following the consultation, the UK government response was that “grant-aided special schools in Scotland will remain in scope of this policy”.

Concerns were also raised about the policy’s impact on the self-funded pupils attending Scotland’s 31 independent special schools, which educate around 700 children and young people, many with additional support needs.

“The Scottish Government has concerns about unfairness to the small number of self-funders at independent special schools. Whilst the vast majority of pupils attending an independent special school are funded by local authorities, there are some children enrolled at these schools who are self-funded,” the response said.

It also warned that the proposed changes would result in “significant additional VAT costs for the Scottish Government” in relation to secure accommodation, which are registered as independent schools.

Recent legislation means no under 18s can be sent to a young offender institution in Scotland, with secure accommodation used instead

“It is essential that the Scottish Government is sighted on the actual additional funding that will be provided by the UK government, to assist with all the pressures arising from this policy in 2024/25 and future financial years,” the consultation response said.

The UK government has said that where a single fee is paid for secure accommodation to cover all aspects of the service they provide, secure accommodation will not be within scope of the policy.

In its memo, Scottish Government officials also warned about a provision in the legislation that meant entire independent school nursery classes would have to pay VAT if any of the children in the class were aged 5 or older.

“The Scottish Government... believes that the approach taken may inadvertently capture some nursery classes in Scottish independent schools which are attended by one or more children who turned 5 before the school commencement date but for whom the education authority has exceptionally deferred their school start date.

“Changes are therefore required to the draft legislation to ensure such nursery classes in independent schools are not captured by this policy.”

The Westminster government was also told by other respondents that there could be more children above school age in a nursery attached to a private school in Scotland than elsewhere in the UK, as parents have the right to request their child’s place in a primary school be deferred for a year if they feel their child is not yet ready.

In response, the UK government changed the draft legislation so that the definition of a nursery class was “a class that is composed wholly (or almost wholly) of children who are under compulsory school age or, in Scotland, school age, and would not be expected to attain that age while in that class”.

However, it is understood 90 per cent of the children in the class need to be below school age for the class to be exempt from VAT, which the sector believes will still negatively impact the likes of Steiner and Montessori schools.

Lorraine Davidson, chief executive of the Scottish Council of Independent Schools, said: “As this document obtained by The Scotsman highlights, the education tax being imposed on Scottish independent schools has taken no account of the many differences in the Scottish education system.

“The Scottish Council of Independent Schools laid out clearly in its own consultation response to the Treasury how the tax on learning would harm all parts of Scottish education.

“Thousands of children in both the independent and state sectors will have their education harmed by this policy and Scottish taxpayers will have to foot the bill to educate thousands more pupils in state schools.”

A UK government spokesperson said: “Ending tax breaks for private schools will raise £1.8bn a year by 2029/30 to help fund public services, including supporting the 94 per cent of children in state schools to achieve and thrive.

“As a result of constructive engagement with thousands of stakeholders, including the Scottish government, we made several changes to legislation - including to clarify the definition and treatment of nurseries, with specific reference to Scottish children.”

A Scottish Government spokesperson said: “We have been engaging with local authorities and the independent school sector to understand the impact of the UK government policy to remove the VAT exemption for independent school fees.

“Officials liaised with UK government counterparts to ensure that the distinctive nature of the Scottish education system is understood as this policy was being developed.”