Divorcing couples fight over who pays VAT hike on private school fees, lawyers say

The VAT rise in private school fees from January has become a new battleground for divorcing couples, lawyers say.

The 20-fee rise – which typically ranges from £6,000 to £13,000 per term – is affecting the negotiation of “school fees orders”, while some existing orders are now potentially unaffordable, they explain.

“This issue has reached a critical juncture, as parents must now decide whether to notify their current schools or enroll them for next September,” says Vanessa Friend, divorce attorney at Hodge Jones & Allen.

“Reaching a settlement can be extremely difficult when we split, and this time-sensitive, high-priced issue adds an additional burden to many of our clients.”

The friend says that pulling a child out of school in addition to a family separation is not something parents take lightly, and this financial and emotional dilemma often makes negotiations more difficult.

Sarah Jane Boon, partner at Charles Russell Speechlys, says: “A court order ordering the payment of a child’s school fees will almost certainly not specify the amount of the fees or that the payment does not include VAT.

“So the parent against whom the order was made must pay the fees, with VAT added, unless they can persuade the court to vary or set aside the order.”

Below, lawyers explain how school fee orders work, what options are available to divorcing parents facing steep increases in the cost of private school, and what you can do with an order that’s already in place.

How divorcing couples react to increased school fees

“Over the past 12 months we have already seen more clients come to us to discuss private school fees as a result of the cost of living crisis – the upcoming VAT rise has only made this worse,” says Helen Marriott, partner in law. firm Brabners.

“Where the payment of school fees has been agreed as part of a court order, the increase in VAT is likely to fall on the parent who is already responsible for the fees.”

While it’s a financial decision, it’s one that can have a big impact on kids, especially older students preparing for exams, says Marriott.

She advises parents to communicate and plan ahead, but notes, “School fees can be a significant cost, so people tend to know whether they can afford it or not.”

Vanessa Friend says maintaining a private school for children is often at the top of the list of non-negotiables when couples divorce.

But the substantial increase in fees has led to an increase in fights over whether they can afford private school and who should cover the costs, she says.

School fees orders, which stipulate that one or both parties will pay, are not uncommon, but the added burden of VAT makes it more complex and time-consuming to agree the commitment, Friend explains.

“The substantial change in costs is the price some couples pay for not giving their child the education of their choice,” she adds.

What options are open to divorcing couples with children in private schools?

Parents need to be realistic and factor in inflation, VAT and extras on the school bill, says Vanessa Friend.

“Some people are prepared to prioritize school fees – some are not. The difficulty arises when the parties cannot agree on where to meet in the middle.

“We strongly recommend that all couples do not enter into a legally binding agreement unless they are confident that they can fulfill these commitments for the full term.”

She goes through the possible options couples face.

– Decide on the needs they are prepared to compromise on, such as the standard of accommodation.

– Sell the family home, including downsizing more than previously planned to free up equity.

– Dip into savings or leave savings and investments aside.

– Discuss the matter in mediation and take a holistic approach to child rearing and other child care matters.

– Lock in an amount of money already available to cover all future school costs, rather than relying on future income – either through a tax fund awarded to the financially dependent party, or through a joint account that provides control and oversight for both.

– Move into the catchment area of ​​a good state or high school, although housing costs tend to cancel out some of the savings.

– Consider whether there is income protection available that could cover the cost of school fees in the event of incapacity.

What if you have an order and can’t afford the fees?

If a parent is struggling to pay school fees, it can be tempting to just stop, says Helen Marriott of Brabners.

But she warns: “If a court order is breached, it could lead to arrears building up and enforcement action being taken.

“In the worst case scenario, it could be considered contempt of court, which is a criminal offence. The school may also bring a civil action against the payee for breach of contract”.

Marriott says if parents now know they won’t be able to afford fees after January’s VAT rise, they should let the school know as soon as possible.

They should start looking for available places in the New Year so that children don’t have to start a new school in the middle of term.

“If parents cannot agree to a new school, then a court application may be necessary. If together the parents can afford the fees, a new payment structure can be agreed, out of court, to ensure that their children’s education remains consistent.

She adds: “Where parents cannot agree on fees, they can apply to court. However, given the significant delays in court proceedings at present, this could take up to 12 months to resolve, so should be a last resort.

Sarah Jane Boon, partner at Charles Russell Speechlys, says: “An application to vary or discharge the order will only be successful if the applicant can establish that the fees are no longer affordable by waiving up-to-date disclosure of their income and earnings.

“Even if the other parent has not paid any of the school fees, they will also have to disclose their financial situation so that the court can decide whether they should now contribute to the increased school fees.

“Any savings either parent might make towards school fees can also be taken into account.”

Hodge Jones & Allen’s Vanessa Friend says an application to the court to reduce an unaffordable costs contribution should not be relied upon.

“The courts will not accept the request lightly. We encourage couples to discuss issues at an early stage and consider alternative forms of dispute resolution such as mediation. This will probably be less expensive than going to court.