Plans to remove rate relief for private schools progress

Private school kids

The Scottish Government has launched a consultation on its plans to make private schools pay extra taxes, sparking calls to examine charity status

26th June 2018 by Gareth Jones 0 Comments

Plans for private schools to be hit with a £5 million tax hike are set to move forward.

The Scottish Government has launched a consultation on its proposals to remove charitable rate relief for private schools.

Finance secretary Derek Mackay announced the change during his budget speech in December of last year, on the back of the Barclay Review into business rates.

Mackay has said the move is aimed at striking the right balance between a competitive tax system and raising funds for public services, however the decision has been slammed by the Scottish Council of Independent Schools (SCIS).

The loss of charity relief, which shaves 80% off rates, means some of the country’s best known schools face tax bills of hundreds of thousands of pounds.

"The launch of this consultation marks the next step in our reform of the business rates system following the Barclay review," said Mackay.

“The recommendations of Barclay, alongside others in the budget strike the right balance between offering a competitive and sustainable taxation environment while delivering sufficient resources to fund the public services which we all rely."

However John Edward, director of SCIS – the body that represents private schools in Scotland – said that the change targets a tiny percentage of registered charities.

He said: “The government’s consultation claims that it helps make Scotland the most attractive place for doing business in Europe; while putting some of Scotland’s most ambitious, successful and historic educational not-for-profit institutions at a competitive disadvantage to the rest of the United Kingdom. It suggests making 50 charitable bodies different from 24,000 others in Scotland and over 180,000 in England and Wales.”

Edward also highlights concerns about how the government came to its conclusions to increase tax.

He said: “The consultation uses a facile calculation of the impact on each school and family, completely disregarding the substantial variations in rateable value that are not dependent on school roll.

The OSCR public benefit test was able to differentiate between sizes, types, facilities, incomes and outgoings, and it is both surprising and disappointing that the government’s own impact assessment was incapable of doing the same.”

John Downie, director of public affairs for the Scottish Council for Voluntary Organisations (SCVO), said that further debate around what makes a modern charity is required.

He said: “SCVO has long held the belief that independent schools are not genuine third sector organisations, and we welcomed the Scottish Government’s decision to stop charitable tax rates for private schools.

“However this presents a wider opportunity to look strategically at what a genuine charity in the modern world is and to review the 2005 Charities Act. There is a case for examining whether private schools merit charity status, but also whether other groups such as universities and arms-length organisations (ALEOS) should continue to have charitable status.”