Private school fees: A 20 per cent hike is pending when VAT is imposed from January
The VAT hike on private school fees from January has become a new battleground for divorcing couples, say lawyers.
The 20 increase in fees – which typically range from £6,000 to £13,000 a term – is affecting negotiations of ‘school fees orders’ while some existing orders are now potentially unaffordable, they explain.
‘This issue has come to an urgent tipping point as parents need to decide now whether to give notice in their current schools or enrol them for next September,’ says Vanessa Friend, divorce lawyer at Hodge Jones & Allen.
‘Reaching an agreement can be extremely difficult when separating and this time-sensitive issue with a high price tag is adding an extra burden for many of our clients.’
Friend says removing a child from their school on top of a family separation is not something parents take lightly, and this financial and emotional dilemma often makes negotiations more fraught.
Sarah Jane Boon, partner at Charles Russell Speechlys, says: ‘A court order compelling payment of a child’s school fees will almost certainly not specify the amount of the fees, or that payment is exclusive of VAT.
‘So, the parent whom the order was made against must pay the fees, with VAT added, unless they can persuade the court to vary or discharge the order.’
Below, lawyers explain how school fees orders work, what options are open to divorcing parents facing steep rises in the cost of private schooling, and what you can do about an order that is already in place.
How does a school fees order work
Vanessa Friend of Hodge Jones & Allen explains the basics of these court orders.
A school fees order is a legally binding court order that a parent, or a person who has assumed the role of a parent, must pay the school fees, she says.
Vanessa Friend: Private school is often high on the list of non-negotiables when couples divorce
The payments may be regular payments or lump sums. The order is commonly used for separating parents with children in private schools.
The order often includes additional costs on the school bill, such as school uniforms, lunches, music lessons, or educational trips.
Both parties must be clear about these additional costs before agreeing.
The order directs the payer to place funds on an account with the school in advance of the school term and to settle any additional invoices from the school within a certain timeframe.
It is important to check the school’s terms and conditions. If both parents sign, they are likely both jointly and severally liable for payment of the fees. For this reason, the order often says the payer must reimburse the other parent for any failure to pay.
In deciding whether to make a school fees order the court will look at the financial resources of both parties and their ability to pay. This includes consideration of what their future income is likely to be and their future outgoings.
How are divorcing couples reacting to school fee hikes
‘In the past 12 months we’ve already seen more clients coming to us to discuss private school fees as a result of the cost-of-living crisis – the upcoming VAT increase has only exacerbated this,’ says Helen Marriott, partner at law firm Brabners.
‘Where payment of school fees has been agreed as part of a court order, the increase in VAT will likely fall to the parent that is already responsible for fees.’
While it is a financial decision, it’s one that can have a big impact on children, especially older students preparing for exams, says Marriott.
She advises parents to communicate and plan in advance, but notes: ‘School fees can be a significant cost, so people tend to know whether they can afford them or not.’
Vanessa Friend says maintaining a private school education for children is often high on the list of non-negotiables when couples divorce.
But the substantial rise in fees has resulted in an increase in the number fighting over whether they can afford private school and who should cover the costs, she says.
Helen Marriott: If a court order is breached it could result in arrears accruing and enforcement action being taken
School fees orders, stipulating one party or both will pay, are not uncommon but the extra VAT burden makes it more complex and time-consuming to agree on the commitment, explains Friend.
‘The substantial change in costs is pricing some couples out of providing their child with the education of their choosing,’ she adds.
What options are open to divorcing couples with children in private schools?
Parents have to be realistic and take into account inflation, VAT and extras on the school bill, says Vanessa Friend.
‘Some people are prepared to prioritise school fees – some are not. The difficulty arises when the parties cannot agree upon where to meet in the middle.
‘We strongly advise all couples not to enter a legally binding agreement unless they are confident they can meet these commitments for the full term.’
She runs through the potential options couples face.
– Decide what needs they are prepared to compromise on, such as the standard of their accommodation.
– Sell the family home, including downsizing further than previously planned to free up capital.
– Dip into savings, or set aside savings and investments.
– Discuss the issue in mediation and take a holistic approach to children’s education and other childcare matters.
– Ring-fence a sum of money already available to cover all future school costs, instead of relying on future earnings – via either a fees fund given to the financially dependent party or a joint account providing control and oversight to both.
– Relocate to the catchment area of a good state or grammar school, although the housing costs tend to negate some of the savings.
– Consider whether there is income protection available which could cover the cost of school fees in case of an inability to work.
Sarah Jane Boon: A court order compelling payment of school fees will almost certainly not specify the amount, or that payment is exclusive of VAT
What if you have an order and can’t afford the fees?
If a parent is struggling to make payments on school fees it may be tempting to simply stop, says Helen Marriott of Brabners.
But she warns: ‘If a court order is breached it could result in arrears accruing and enforcement action being taken.
‘In a worst-case scenario, it could be considered a contempt of court, which is a criminal offence. The school may also be able to pursue a civil claim against the payee for breach of contract.’
Marriott says that if parents know now that they won’t be able to afford the fees after the VAT hike from January, they should let the school know as soon as possible.
They should begin looking for places available from the New Year, so children don’t have to start a new school in the middle of term.
‘If parents can’t agree on a new school, then a court application may be needed. If together the parents can afford fees, a new payment structure, outside of court, can be agreed to ensure their children’s education remains consistent.’
She adds: ‘Where parents can’t reach an agreement about fees, they can make an application to court. However, with the significant delays in court proceedings currently, this could take up to 12 months to be resolved, so it should be a last resort.’
Sarah Jane Boon, partner at Charles Russell Speechlys, says: ‘An application to vary or discharge the order will only succeed if the applicant can establish that the fees are no longer affordable, by giving up to date disclosure of their income and outgoings.
‘Even if the other parent has not been paying any of the school fees, they will also need to provide disclosure of their financial position, so that the court can decide if they should now make a contribution to the increased school fees.
‘Consideration may also be given to any savings which either parent could put towards the school fees.’
Vanessa Friend of Hodge Jones & Allen says an application to the court to reduce a contribution towards unaffordable costs should not be relied upon.
‘The courts will not grant the application lightly. We encourage couples to discuss the issues at an early stage and consider alternative forms of dispute resolution such as mediation. This is likely to be less expensive than attending court.’
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