PRIVATE SCHOOLS’ TAX SHOCK LOOMING By Sarah Case, Broomfield and Alexander
Wales’ private schools – which educate about 18,000 pupils every year - have now received the first indication of how they are going to have to do more for the public benefit in the future if they want to hold on to tax breaks worth thousands of pounds.
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Currently, Wales’ 50 or so private day and boarding schools save the equivalent of £225 per pupil on their tax bill each year because of a presumption in law that education is a charitable activity. They also receive tax relief on donations and legacies – a vital element of some schools’ funding.
In return, they are supposed to provide “public benefit” – subsidising places for poor children, or offering the use of their facilities to local people – but this has never been strictly monitored. This benefit must not be ‘token’ or occur by accident, but should be enshrined in the school’s “original purpose”.
But experts in tax issues for charities are warning that, with the introduction of the Charities Act last year, private schools will now have to demonstrate clearly what they do in this area to justify their charitable status – or risk losing it and the tens of thousands of pounds of additional revenue which go along with it.
Guidance on what constitutes public benefit for charities has now been published by the Charity Commission with further guidelines for schools specifically due out later this year.
Schools will need to look carefully at the guidance and start planning. As it stands, it’s likely that few private schools in Wales will qualify for their charitable status under the criteria of these guidelines.
The only plus point is that the Charity Commission has said they are not expecting changes to be made “overnight”, but even so, schools are going to have to start looking critically at what they do to the public benefit, and get planning if they do not currently meet the new guidelines.
Sarah Case is a director of professional advisors Broomfield & Alexander, and part of their specialist Charities Team. She can be contacted on 01633 265828.