Legal challenge: does VAT on private school fees interfere with the human right to receive an education?

In BYL & Anor, R (on the application of) v Chancellor of the Exchequer the Court of Appeal considered whether charging VAT on private school fees breaches rights under the European Convention on Human Rights (‘the Convention’). 

Background

Private school fees were previously exempt from VAT. Ahead of the 2024 general election, the Labour party committed in its manifesto to remove that exemption. Following the election, the government confirmed that, from 1 January 2025, all education, boarding and vocational training provided by UK private schools for a fee would be subject to VAT at the standard rate of 20%. 

In its policy paper ‘Private school fees – VAT measure’, the government said the change is designed to raise money to support public finances. It also said the aim is to make the education system fairer by ensuring families who use private schools contribute their fair share, while continuing to protect pupils whose needs cannot be met in the state sector and whose places at private schools are funded by local authorities. 

Legal challenge 

Parents and children attending some low-cost private schools brought claims, alongside the schools themselves. The claimants fell into two groups: 

1. schools serving the Charedi Orthodox Jewish community (Group 1); and
2. schools following a strictly Evangelical Christian curriculum (Group 2)

Both groups argued that the state school system does not offer the type of religious education they want for their children. They said that applying VAT to school fees would make the schools unaffordable for many families, force some children to leave, and ultimately cause some schools to close.

The schools involved charge relatively low fees and, in some cases, rely on donations from the community or other sources. Even so, the claimants argued that adding VAT would put these schools beyond the reach of many families and deprive children of the religious education their parents have chosen for them. 

They argued that the government should introduce an exemption for low-fee schools, so that schools charging below a set threshold would not have to charge VAT on school fees.

The claimants argued that charging VAT breaches article 14 of the Convention, which prohibits discrimination in the enjoyment of the other Convention rights, when read with article 2 of protocol 1 which provides that: 

• No person shall be denied the right to education. In the exercise of any functions which it assumes in relation to education and to teaching, the State shall respect the right of parents to ensure such education and teaching in conformity with their own religious and philosophical convictions. 

Group 2 claimants also argued that charging VAT violates both article 2 of protocol 1 and article 1 of protocol 1, either on its own or when read together with article 14. Article 1 of protocol 1 states that: 

• Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. 

The High Court rejected all claims. It held that any interference with Convention rights was justified and proportionate. 

Court of Appeal

The claimants appealed to the Court of Appeal, which looked again at whether the government had an objective and reasonable justification for refusing to exempt low-cost private schools from VAT. 

The Court of Appeal agreed with the High Court that article 1 of protocol 1 (the right to peaceful enjoyment of possessions) was not engaged. The schools were complaining about a loss of expected future income, which does not count as a ‘possession’ for these purposes. The parents' argument also failed, because VAT does not interfere with their possessions: they are not obliged to keep sending their children to such schools. 

The Court of Appeal also agreed that charging VAT does not interfer with the essence of the right to education under article 2 of protocol 1. It quoted Lord Bingham from A v Head Teacher and Governors of the Lord Grey School who said “[t]here is no right to education of a particular kind or quality, other than that prevailing in the state.”

The Court of Appeal concluded that the government had shown an objective and reasonable justification for refusing to exempt low-cost private schools from VAT. It accepted that introducing an exemption based on a fee threshold would create a number of serious problems, including the following:

• It would result in very different treatment for schools with fees just below the threshold compared to those just above it. That would be unfair to schools charging only slightly more and could itself lead to further legal challenges.
• It could distort the market and undermine fair competition by encouraging schools to keep their fees artificially low in order to stay under the threshold.
• It could incentivise schools either to cut costs or to try to avoid VAT by, for example, reducing fees but making up the difference through so-called 'donations' that were not genuinely discretionary. Policing this kind of behaviour would be difficult for HMRC.
• It would increase administrative burdens for both compliant schools and HMRC and make the legislation more complex to operate in practice.
• It would significantly reduce the revenue raised by the measure by an estimated £30 million a year if an exemption was applied to schools charging fees below £7,690 per annum.
• It would be inconsistent with the government’s wider policy position that state education is suitable for children of all faiths and none, and that all schools must comply with the Equality Act 2010. 

The Court of Appeal therefore dismissed the appeal.  

What does this mean? 

VAT continues to apply to all private school fees, and there is no exemption for low-cost private schools.  However, according to a BBC news report, the schools are now seeking permission to appeal to the Supreme Court, so we will have to wait to see what happens next. 

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