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Scottish Independent Schools: How To Mitigate Possible Changes To VAT Status

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Scottish Independent Schools: How To Mitigate Possible Changes To VAT Status

Scottish Independent Schools: How To Mitigate Possible Changes To VAT Status
December 15
14:09 2023

With a Labour government potentially on the horizon, independent schools are facing the possibility of a VAT introduction to school fees. can do now in order to mitigate the financial pressures if Labour do come into power and introduce VAT on school fees.

Joe Parfitt explores the steps that schools can take to mitigate the consequent financial pressures.

If Labour do win the next general election, they originally stated they planned to strip independent schools of their charitable status. However, at the time of writing, they have announced that they don’t plan to do this but do still intend to start charging VAT on school fees and impose business rates.

It’s not all bad news for schools as there will be some current perks that will remain, including being able to claim gift aid on donations and tax relief on annual profits.

While many independent schools have been sharing concerns around the impact that a VAT introduction will have, there are still options available that will help mitigate the financial pressures and risks. In fact, these are measures that should be implemented regardless of the political landscape.

One such option will be to bring their catering provision in-house which will allow them complete flexibility around suppliers and product purchasing, ownership of the catering team, as well as complete sovereignty over service, allowing schools to make changes quickly without impacting the commercial agreement with a third party.

However, this option should only be explored following an options appraisal. Short-term savings can be quickly eroded without proper management systems, procurement expertise and staff development strategies in place.

Then of course there is the additional workload involved in ensuring an productive, proactive catering team is installed, managing recruitment and staff, as well as the expertise required to establish the new supply chain arrangements and food safety. Many schools will likely need to bring in external expertise to support them during the transition period.

“Alternatively, schools can keep the catering service contracted out and focus on ensuring the service is delivering the best possible value.

Savings will likely be made through renegotiation with the service provider following a best-value benchmarking review. At Litmus, we collect millions of food procurement prices every month to provide clients with tactical insight and letting them see how their costs compare to an anonymised list of others in their sector and how these compare against the market average. Armed with this knowledge, it’s far easier to challenge any cost increases.

Putting the contract out to tender gives schools the opportunity to review their options, understand how their current provider is performing against the competition and decide whether a move will deliver them cost savings and an enhanced service.

There are of course other money-saving options that can have a positive impact on schools that are under pressure. Food waste remains an expensive problem and there are various tech solutions that enable tracking of spend and waste that can significantly reduce costs.

Likewise, internal hospitality spend is notoriously uncontrolled, with few departments having set catering budgets or caps on what staff members can order. This is an area that can also be tightened up. For example, developing menus and brochures of the internal hospitality options, with costs clearly stated and clarity on spend limits, will ensure the school can manage their budget much more effectively.

And so while there is no magic wand if the VAT element does come into play, there are several avenues to explore in terms of how services are managed that will deliver real-time savings and mitigate risks.

Joe Parfitt is Education Consultancy Director at the Litmus Partnership.

Litmus has been providing education facilities management and catering consultancy for Independent Schools for over 30 years.

* Main photo credit: George Watson’s College, Edinburgh: The venue for the Scottish School Food Awards 2023.

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Catering Scotland

Catering Scotland

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