Foreign Office pleads for discounts from private schools after VAT raid

A group of schoolchildren sit together
Labour will press ahead with its plans to charge private schools VAT from January 2025 - Monkeybusinessimages/iStock

The Foreign Office has pleaded with private schools to roll out discounts for diplomats after the Government’s VAT raid on fees.

Hundreds of diplomats’ children receive Government funding to help pay their boarding school fees while their parents serve the country abroad.

But the taxpayer-funded support is capped and the difference parents are expected to pay is set to grow as schools raise their fees to pay for the VAT they will now be charged.

The Foreign, Commonwealth and Development Office (FCDO) has now written to dozens of top boarding schools asking for them to offer diplomats a discount on their children’s fees. Private schools said the FCDO appeared to be asking boarding schools to effectively exempt the Government from the fee rises it had caused.

The email was sent to schools on Friday morning – two days after Rachel Reeves confirmed new rules for private schools in the Budget – and thanked staff for “supporting the education of these children, and for the pastoral support… which is so important for our families when parents are posted overseas”.

Ampleforth College in York
Ampleforth College is one of the top private schools in the UK already offering military parent discounts - Park Dale/Alamy

The letter said: “I am enquiring whether you would consider providing a discount to include FCDO families. As you may be aware, FCDO staff and their families are subject to regular movements to and from overseas postings, in the same way as military families.

“By offering a discount, inclusion on this list would help make your school more attractive to prospective parents.”

The letter also asked schools to provide details of their plans to deal with the Government’s tax raid, which will hit private schools with VAT from January 1 2025.

“Separately, we are hearing a lot of concern from our families about [the] impact of the new Government’s proposal to remove the exemption from VAT for private school fees,” the FCDO’s education team in the HR department said.

It added that staff would find it “helpful to understand any plans your school may be considering in relation to this”, before asking schools to consider the discount request “favourably”.

The email’s subject line was: “FCDO DISCOUNT REQUEST AND VAT IMPACT”.

The FCDO denied any link between the requests for discounts and the VAT policy change.

A mother drops off her children at school
Labour’s policy is likely to lead thousands of parents to pull their children out of private education - Supersizer/E+

Ms Reeves confirmed last Wednesday in her maiden Budget that private schools will be charged VAT of 20 per cent, reversing a previously long-held exemption. Most schools have said they will put up their fees to cover the increased costs.

The Chancellor defied calls to exempt military and diplomatic families from the tax policy but has announced they will instead receive more taxpayer-funded support. However the exact details of the support have not yet been revealed.

A spokesperson for the Independent Schools Council (ISC) said: “It is somewhat surprising for the Government to ask that it be effectively exempted from the fee rises it has caused.

“The extra costs to the Government are because of the VAT policy it rushed through against the advice of tax and teaching experts. We remain open to working with the Government on ways to mitigate the impact of VAT on diplomatic families – as well as on children with SEND [special educational needs], on military families and on faith-based education.”

Neil O’Brien MP, the shadow education minister, said: “The sheer brass neck of this Government clearly knows no bounds.

“Despite the endless warnings of the damage [its] tax would cause, Labour chose to press ahead anyway – and are now asking schools to foot the bill for the diplomats that [it] failed to consider.

“This policy is a mess, and there are still unanswered questions about the impact on children with special needs too.”

The Foreign Office in Westminster
The Foreign Office has pleaded with private schools to offer its staff discounted fees - Dominic Lipinski/PA

Around 4,700 children from military and diplomatic families already receive support on their school fees through the Continuity of Education Allowance (CEA). The FCDO spent £13.7 million subsidising the cost of UK private school fees for children of diplomats in 2022/23. A total of 514 pupils had their school fees at British boarding schools covered by the department last year, at an average cost of £26,848.

The allowance is designed to provide stability for children whose parents frequently work away, and can cover up to 90 per cent of boarding school fees.

It is currently capped at £9,080 per term for secondary schools – almost £6,000 less than average boarding school fees, according to the ISC. This means that military and diplomatic parents often have to pay as much as £18,000 each year despite receiving Government support.

The FCDO has said it will increase CEA funding to account for the impact for any private school fee increases. It came after groups representing military and diplomatic families warned of an exodus unless the Government rolled out further support. Securing discounts for diplomatic families would reduce the additional funding they would need to provide.

Rachel Reeves, Chancellor of the Exchequer
Rachel Reeves has overseen £40bn’s worth of tax rises in the Budget - Tayfun Salci/Shutterstock

Some private boarding schools already offer discounts for military and diplomatic families to help reduce the bill for parents. It means leading boarding schools such as Gordonstoun, Ampleforth College and Millfield School sometimes pay tens of thousands of pounds to subsidise the cost of private education for service children.

The request for discounts comes as both the FCDO and MoD face a steep rise in costs following the promise to raise the CEA. The Treasury confirmed last week that the two Government departments will have to eat into their own budgets to boost the financial support scheme.

Last month, the FCDO said it expected the VAT policy to increase their education costs by £2.5m in 2025-26.

Government departments are understood to be facing funding pressures after Ms Reeves instructed them to make billions of pounds of savings.

An FCDO spokesperson said: “There will be no exemptions for diplomats on VAT for private school fees and the FCDO is not asking schools for special treatment in relation to this policy. This is not and has never been government policy.”