Could Independent Schools Lose Their Charitable Rates Relief?

Could Independent Schools Lose Their Charitable Rates Relief?

Independent schools have charitable status and this comes with tax breaks on their rates. Although there has been an on-off debate for some time about the charitable status of these schools, this rates relief has remained in place.

This, however, may be set to change.  At end of August 2017, the Scottish Government published the report of Kenneth Barclay’s review into non-domestic tax rates.

The Scottish Government gave Barclay a revenue neutral remit – to come up with recommendations that would enhance and reform non-domestic rates in Scotland, but keep the same level of income derived from them.


Recommendations of the Barclay Review

Under his measures to increase fairness, Barclay focuses on charitable rates relief.

“Barclay sees an inequality between independent or private schools that, as charities, benefit from zero rates bills, and state schools which generally pay rates,” observes Paul Giness, Partner at The Beattie Partnership.”

In the words of the report, Barclay states that:


This is unfair and that inequality should end by removing eligibility for charity relief from all independent schools


“While there are other recommendations that could have an impact on independent schools, this is the one which feels most significant, because of the choice of words,” suggests Paul.


What is the Value of Schools’ Rates Relief?

In his report, Barclay estimates that removing tax relief from independent schools in Scotland would bring in an additional £5 million in tax.

“It is up to the Scottish Government whether to adopt any or all of Barclay’s recommendations, and if they do, how to phase them in,” Paul remarks.


“Now that the recommendation is out there, it may take on greater prominence in any debate about independent school in the rest of the UK”

Paul Giness, The Beattie Partnership


Property values for many private schools in England and Wales have soared since the previous rateable values were put in place. Were they not to receive rates relief, they would be paying over £1billion in business rates, following the 2017 revaluation.

“As things currently stand, this bill will come to a much-reduced figure when taking relief into account,” Paul says.


The Price of Fairness

“The total estimate in tax breaks for all independent schools in England and Wales is over £520 million,’ Paul offers, “which is a big sum to consider for any politician contemplating the price of fairness.”


“For independent schools, any change will be costly, if not, in some instances ruinous”

Paul Giness, The Beattie Partnership


For a government, however, removing charitable rates relief may be expedient.

“This is where the danger lies for schools,” Paul concludes “they might keep their charitable status, but lose the financial relief that goes with it.”

To be kept up to date with future developments of the impact of the Barclay Review, please contact The Beattie Partnership.