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Starmer Faces Potential Reimbursements to Private Schools Amid VAT ‘Loophole’ Scandal

Starmer Faces Potential Reimbursements to Private Schools Amid VAT ‘Loophole’ Scandal

In an upcoming EcoReporter segment, we will be discussing the potential impact of Labour leader Keir Starmer’s plan to remove the tax break for private schools, which could raise an estimated £1.7bn for state schools. However, tax specialists have identified several VAT loopholes that could undermine this plan and discriminate against smaller private schools. School leaders are exploring avenues to exempt themselves from VAT, including reclaiming VAT from large building and maintenance projects up to 10 years old, making certain clubs exempt under HM Revenue and Customs criteria, and classifying full-time boarders as accommodation to benefit from HMRC exemptions. These loopholes could allow private schools to claw back millions of pounds of public money, potentially reducing the impact of the VAT charges on schools and parents. However, critics argue that this would disproportionately affect those who can afford it the least, as smaller schools may not have the capacity to absorb the increase in costs. The impact of this policy has not been fully assessed, and some school leaders believe that VAT is a regressive tax that will negatively impact those least able to bear the burden. Schools such as Magdalen College School, Harrow School, and Winchester College may be able to claim back VAT on recent projects, but the amount recovered may not cover school fees for many students. Overall, the potential loopholes in the policy could undermine Labour’s plan to raise funds for state schools through the removal of tax breaks for private schools.

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