Labour accidentally taxes three-year-olds in private school raid

Toddlers will inadvertently be taxed under Labour’s private school VAT raid despite ministers promising it would exempt nursery children.

The “rushed” legislation means the parents of three and four-year-olds will be dragged into paying 20pc VAT from January if their children are in “mixed-age” classes.

Mixed-age classes are often used in early years provision by small private schools. They combine nursery children with reception-age children to form classes of three to five-year-olds.

Labour previously vowed all nursery provision, even if part of a private school, would be exempt from its tax raid.

However, buried in the Government’s draft legislation, a nursery class is defined as being “composed wholly of children who are under compulsory school age (five years old) and would not be expected to attain that age while in that class”.

It means that in a class where one child is five years old or due to turn five by the end of the year, the whole class is forced to pay VAT, no matter their age.

Headteachers have called the decision “bizarre” and “greedy” and criticised Labour for the “lack of clarity”.

Sam Sims, headmistress at Meadows Montessori, a small independent school in Ipswich that combines pupils aged between three and six, said: “It’s appalling. I only became aware of this a couple of weeks ago.

“When you realise that because we chose to put these children in a mixed-class, they have to pay [VAT] but if we chose not to, they wouldn’t, [it] just seems bizarre. It is money-grabbing and it is greedy.”

Ms Sims said the decision to teach children in a mixed-age class was a key facet of a Montessori education and not something the school could afford to change. 

She said: “We don’t have the available space or the staff to suddenly split our class, and it goes against our ethos.

“Mixed-age classes in a Montessori environment means they stay with the teacher for an extended period of time. Ideally they have a three-year cycle with the same staff member so staff get to know the child really well and understand how they learn.

“It also enables the child to transition from being the youngest to the oldest so it shows responsibility in the classroom.”

Meadows Montessori has 62 pupils aged between three and 16. It charges £2,940 per term for all primary school pupils. It means the parents of nursery-age children at the school will have to pay an extra £1,764 in VAT per year from January.

Ms Sims said: “It’s a greedy tax. The Government is thinking ‘we are going to grab it as early as we can’, with no thought for the children. This policy is massive for somewhere like us. And there will be lots of little independent schools around the country who are in exactly the same position.”

Park School in Totnes, Devon is another school which has now had to tell its parents that nursery-age children will be charged VAT.

The headmistress, Laura Hare, was equally unaware until a few weeks ago that the Government’s exemption would not apply to their small private school.

She said: “We have a lot of mass-operation nurseries in our area who will not suffer as a result of this but small schools who are really community driven – child-centre values will get blown out and that’s where for me it brings fear and anxiety.”

The school has explored the option of separating its early-year provision from the rest of the school, but Ms Hare said the administrative costs of setting it up as a separate school were not financially viable for her school and not achievable halfway through a school year.

She said: “There is just so much chucked out there [by the Government] that is so vague, it doesn’t allow us to make decent financial projections around how we could support our parents to pay the 20pc.”

Julie Robinson, chief executive of the Independent Schools Council, which represents 1,400 members, said: “There are currently over 200 questions with the Treasury about the details around the Government’s education tax; much remains unclear for schools.

“A rushed January implementation will only exacerbate the issues around the policy, particularly for children with Send [special educational needs and disabilities], military families and those choosing schools aligned with their faith.”

A government spokesman said: “The vast majority of nursery classes will not be subject to VAT, as children have usually entered the first year of primary school by the time they are five years old.”

“We want to ensure all children have the best chance in life to succeed. Ending tax breaks on private schools will help to raise the revenue needed to fund our education priorities for next year, such as recruiting 6,500 new teachers.”