THE government’s decision to impose VAT on Dorset’s private schools could lead to a closure rate of between 10 and 20 per cent within three years, a sector specialist has warned.  

Chancellor Rachel Reeves announced earlier this summer that from January VAT exemption and business rates relief for private schools will be removed. 

Currently, independent schools do not have to charge 20 per cent VAT on their fees because there is an exemption for the supply of education. 

But the government argues by removing the exemption, funding will become available for new teachers in state schools.  

Rob Young, business restructuring, turnaround and rescue expert at Poole and Blandford-based Azets, warned there is “not enough time” for schools to adjust. 

This could potentially lead to “significant disruption” for pupils in both private and state school sectors, he added. 

He said: “It’s not the beginning of the end of private schools but it is an act of self-harm on arguably one of the UK’s greatest export sectors, which is internationally recognised as being world-leading. 

“Most, if not all, private schools cannot afford to absorb a 20 per cent slab tax imposition – so fees will rise, therefore the number of pupils will decrease and private education will become even more exclusive. 

“The well-known schools, backed by the wealthiest parents and overseas families, will get by, but the less well known schools in the private sector are the ones at risk, especially those away from London and the south east.” 

Azets, which works closely as a trusted advisor across the whole education sector, said private schools should take professional advice and act swiftly and decisively over the VAT issue. 

For the schools that remain viable, they will need to comply with the new legislation, some of which is open to interpretation. Those not already registered for VAT will be required to adopt new VAT systems and procedures.  

Rob added: “The sooner private school governing bodies seek to plan for this tax imposition the more options they will have.  

“They need to engage with scenario, cash flow and estate management planning and a whole lot more to seek to preserve their businesses. 

“If they just bury their heads in the sand and wait to see if they can just carry on through it regardless, they are likely to be left with a very sore head. Governors, as directors, should also be mindful of their responsibilities because if they get it wrong they risk personal liability.” 

A Government spokesman said: “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. 

“It is for individual schools to consider how they manage this cost based on individual circumstances, including steps to minimise fee increases.”