Entire nursery classes will be hit by Labour VAT raid

Entire nursery classes will be drawn into Labour's VAT raid on independent schools, HMRC documents have confirmed.

The tax will apply to private schools that keep five-year-olds back a year because of developmental issues.

The documents show VAT applies to all private school classes containing those aged five and older. 

This includes all children in a nursery class containing one or more five-year-olds, even if the others are younger.

The issue was raised in Parliament last week and reported in the Mail, as MPs said the tax was likely to apply in this situation, creating a 'nursery tax'.

Now guidance published on the HMRC website confirms this. It reads: 'Nursery classes made up wholly of children below compulsory school age remain exempt from VAT.

 If the nursery contains children of compulsory school age who you receive a fee for, the whole of the class will be subject to VAT.'

The revelation comes despite Labour saying they planned to exempt all nurseries from the planned VAT on fees, which will be introduced in January.

The Independent Association of Prep Schools (IAPS) said that the Government's decision was 'punitive, [and] defies logic'.

Emilie Darwin, deputy chief executive at IAPS, told i News: 'The Government has given no consideration to the real impact on children of this ill-thought-through policy. This is likely to deter schools from agreeing to hold a child back, even when they would really benefit from it.'

Early-years education providers said it has become increasingly common to hold children back a year due to developmental concerns or special educational needs and disabilities, meaning the nursery tax could be 'potentially very widespread'.

A Treasury spokesman said: 'The majority of nursery classes will not be subject to VAT, as children have usually entered the first year of primary school by five.'

Yesterday, the new tax was raised in a debate in the House of Lords, introduced by the Tory Lord Lexden, President of the Independent Schools Association. He said Labour's need of taxation money was trumping child welfare.

Labour peer Lord Hacking attacked his own party, saying its estimate of pupils moving into the state sector was 'patently wrong'. 'This must not happen,' he said.