Contact us
Back to blog

Navigating VAT on Independent school fees: How estate and energy strategies can mitigate the impact

Author Thumbnail

Robert Gould

Partner at Barker | Award-Winning Integrated Property Consultants

Introduction 

Following their election victory in July 2024, Labour confirmed their policy that Value Added Tax (VAT) on independent school fees will be applied and this has now come into force. The impact of this necessitates a proactive approach from educational institutions to mitigate its effects. 

Much has been said on this subject but in this article, we delve into the implications of VAT on school fees in the independent sector and focus on how strategic estate and energy management can offer solutions to navigate this challenge effectively. 

VAT Recovery on building works 

With the imposition of VAT on school fees, independent educational institutions are confronted with the need to reassess their financial strategies. One avenue for mitigation lies in understanding the VAT recovery mechanisms available for building and renovation work. Schools should record all building and renovation projects conducted over the past decade with total expenditures exceeding £250,000. By doing so, they position themselves to secure partial VAT recovery on these costs, offering a potential avenue for financial relief amidst the VAT imposition. 

Energy Efficiency as a Mitigation Strategy 

Energy costs loom large as a significant operational expense for educational institutions. In fact, energy expenditure often ranks as the second highest operating cost for schools, following staff salaries. Focusing on energy efficiency measures presents an opportunity for schools to offset the impact of VAT on school fees while enhancing long-term financial sustainability. Achievable reductions in energy consumption, up to 50%, are within reach for most schools through initiatives such as Solar PV panels, LED lighting upgrades, heating controls optimisation, and behavioural change programs. A case could be made for using funds made available from the deferment of other capital projects to deliver energy projects that offer a strong return on investment. 

Energy saving examples 

  • Solar panels can supply around 25% of a school’s electricity at a cost of around 8p/kWh and have a payback period of 3-6years. In the last year, Barker have designed and managed the installation of over 200 solar PV arrays for UK schools. 
  • High efficiency LED lighting can generate a 20% saving in electricity usage. Did you know, most lighting projects are carried out in term time with zero disruption to teaching? 
  • Following a heating system audit for an independent school in Hertfordshire, Barker’s engineers identified and delivered £60,000 ongoing annual savings simply by optimising heating controls, programmers and building management systems with no capital expenditure. 

How Barker Can Help 

In navigating the complexities of VAT on school fees and bolstering financial resilience through energy management, independent schools can benefit from the expertise and support of Barker. Our team specialises in helping schools develop comprehensive strategies to reduce long term energy use, assess return on investment for energy efficiency measures and identify suitable funding models. From project inception to implementation, Barker partners with independent schools to deliver sustainable solutions that generate long-term savings in operating costs, ensuring financial security and educational excellence. 

Conclusion 

As VAT on school fees becomes a reality for the independent education sector strategic planning and proactive measures are imperative for schools to weather the financial implications effectively. By leveraging estate and energy management strategies, schools can not only mitigate the impact of VAT but also enhance their financial resilience and sustainability in the long run. Through strong leadership, expert technical advice and a strategic approach educational institutions can navigate these challenges with confidence, ensuring continued delivery of quality education for generations to come. 

Let's talk

See
the project