The Government has announced it will apply 20 per cent VAT to private school fees across the UK from January 2025.
We know some Army families have concerns about how this change might affect their children’s education.
A public consultation was open during the summer, and AFF submitted Army families’ evidence about the impact VAT on private schools will have on Service children.
Your evidence helped us to submit a detailed consultation response sharing your views.
The Government has now responded to the consultation and there are no exemptions for Armed Forces personnel and Service children.
The MOD will recalculate Continuity of Education Allowance (CEA) rates before January 2025. While it is helpful to have confirmation that CEA will be increased in response to the application of VAT to private school fees, we know that this recalculation will mean that the minimum 10 per cent parental contribution will also need to increase.
The Government has stated it will be monitoring how these changes affect military families, with any potential adjustments to the scheme being considered during the next Spending Review.
We do not know how it will be monitored at this stage, but AFF will continue raise all your questions with the MOD and press for answers.
Will Army families be exempt from paying VAT?
No, there are no exemptions for Service personnel and their children from paying VAT on private school fees.
The Government has responded to the technical consultation and stated that the “MOD will increase the funding allocated Continuity of Education Allowance (CEA) to account for the impact of any private school fee increases on the proportion of fees covered by the CEA.
“5.20 The Government greatly values the contribution of our diplomatic staff and serving military personnel. The CEA provides clearly defined financial support to ensure that the need for frequent mobility, which often involves an overseas posting, does not interfere with the education of their children. Ahead of the VAT policy coming into effect on 1 January, the Ministry of Defence (MoD) and the Foreign, Commonwealth and Development Office (FCDO) will increase the funding allocated to the CEA to account for the impact of any private school fee increases on the proportion of fees covered by the CEA in line with how the allowance normally operates. The MoD and FCDO will set out further details shortly.”
A full copy of the Government response can be found here – Government Response to the Technical Note on Applying VAT to Private School Fees and Removing the Business Rates Charitable Rate Relief
My children are at a state boarding school, will they be exempt?
Education and boarding provided by state schools will be exempt from VAT.
2.12 Education and boarding provided by state schools (including academies) are not affected by this policy change, meaning they will continue to be exempt from VAT. This reflects the fact that state schools and academies will continue to be ‘eligible bodies’.
I am claiming Continuity of Education Allowance, will this increase?
Continuity of Education Allowance (CEA) is reviewed annually by the MOD, normally around 1 August each year. When the MOD calculates the rate, it looks at the average fee increases across a percentage of schools, to help determine how much CEA will increase that year.
The MOD will now conduct another in-year recalculation of CEA with the addition of VAT included.
We know the normal process of a CEA recalculation includes all schools including state boarding. At this stage we do not know if there are any changes to the calculation method. We will be asking the MOD not to include state boarding schools as they have been exempted from this VAT legislation.
When will the MOD increase CEA rates?
Once the recalculation is complete, the MOD expects to publish the new CEA rates before the December pay run. The rates will be effective from 1 December 2024, meaning that claims for the spring term 2025 onward will be on the new rates.
How much will the new CEA rates be?
Until the MOD has completed the recalculation, we do not know how much fees will increase. As soon as we have the updated rates, we will publish them.
Will the increase in CEA rates cover all the extra VAT?
Army families claiming CEA at a private school must make a 10 per cent minimum parental contribution to school fees. Any recalculation will mean that the parental contribution will also need to increase, therefore this will not cover all the increased costs for Army families. We know families facing higher bills need information so they can plan how they will meet next term’s school fees, so we will continue to raise your questions to the MOD.
What if I cannot afford the increases once the costs are recalculated?
The MOD has advised that those who cannot afford costs and wish to change school due to affordability, can contact the Pay and Allowances Casework and Complaints Cell (PACCC) – DBSMilPers-MilOps-PACCC-Group@mod.gov.uk.
AFF recognises that this may not be a desired option for Service children to move school and for those already in critical exam years this may not be possible.
If you are affected, please contact us at moneysupport@aff.org.uk
What is AFF doing?
We have been raising your concerns with the MOD and working with organisations like the Independent Schools Council, the Boarding Schools’ Association and the other families federations to highlight the importance of a stable educational experience for Service children, and the role independent schools can play in this.
AFF made a formal a submission to the consultation about the impact this policy will have on some Army families.
We also used your evidence and wrote to the House of Lords to highlight the unique challenges this policy will have on Army families to inform their debate on 5 September.
We are continuing to raise all your questions and concerns to the MOD and will ensure any impact on Army families is monitored.
If you would like to contact us, please email moneysupport@aff.org.uk
MOD statement
The MOD has released communication about the announcement on Defence Connect (login required) and published below.
In today’s Budget speech The Chancellor of the Exchequer has confirmed that the Government will remove the VAT exemption for private schools from 1 January 2025.
For families claiming the Continuity of Education Allowance (CEA) this is likely to increase private school fees.
To minimise the impact of this change, the Secretary of State has directed that the CEA rate cap will be uprated, to ensure it continues to pay up to 90% of school fees for eligible claimants.
What does this mean for CEA claimants?
The CEA scheme recognises the enormous sacrifices our military families make and aims to minimise the disruption to their children’s education caused by Service commitments involving frequent moves of the family home.
The Government remains committed to improving Service life and renewing the nation’s contract with those who serve and their families. Whilst the new VAT policy does not offer any exemptions, the Government is committed to monitoring how these changes affect military families, with any potential adjustments to the scheme being considered during the next Spending Review.
To protect the integrity of the allowance the Secretary of State has directed that the cap on the current rates is uprated, and CEA rates are recalculated to take into account the addition of VAT. This will ensure the MOD continues to pay up to 90% of private school fees following the taxation changes.
Whilst the CEA cap uprating will provide some protection from fee changes as a result of the VAT exemption being lifted, the parental contribution may also increase if schools choose to pass this on. Some claimants may need to consider this before the policy takes effect.
If you need to change your child’s school due to affordability, contact the Pay and Allowances Casework and Complaints Cell (PACCC) via DBSMilPers-MilOps-PACCC-Group@mod.gov.uk. You can also contact the Educational Advisory Team UK (EAT UK) via rc-dcs-hq-eat@mod.gov.uk if you require specific educational advice regarding your child.
CEA rates adjustment
The CEA rates are influenced by pricing adjustments made by the UK education sector. The rates are calculated on an annual basis using the range of school fees, most used by the Service personnel claiming the allowance. The MOD’s reassessment of rates will allow claims paid in December to reflect the new CEA rates ahead of any school fee increases from January 2025.
The annual CEA rating cycle for the academic year 25-26 will still be conducted in August 2025 in advance of the beginning of the new academic year in September 2025.
Army statement
The Deputy Chief of General Staff has also released a statement posted on Defence Connect and published below.
The Army understands the importance of providing continuity of education for children of serving personnel and is acutely aware of the potential impact on affected families of VAT being added to private school fees. Scoping how to mitigate this impact has been a priority since the announcement was initially made in July.
As a result, the announcement that the MOD is in the process of recalculating the CEA rate is very welcome and will I hope reassure those who claim it. CEA rates are calculated with direct reference to a cross-section of the schools most used by Service personnel and the annual exercise to do so is currently taking place, with the addition of VAT included. The MOD expects to publish the new CEA rates in advance of the December pay run, in time for CEA claimants to pay spring term 2025 invoices.
Thank you for your understanding and patience on this matter. All Army Service personnel and their families should be reassured that the Army will continue to monitor the impact of this policy announcement and ensure that their interests are actively represented.
POSTED ON 31 OCTOBER 2024