School Charities and Tax
The vast majority of ISC independent schools are charities and have charitable status.
The vast majority of ISC independent schools are charities; around 1,000 of our 1,267 schools have charitable status. Charitable status is still the most appropriate legal form for schools operating on a not-for-profit basis with a focus on the public benefit of the education they provide. The Charities Act 2006 and ISC’s judicial review 2011 confirm their standing as charities. This means that trustees of school charities have a responsibility to ensure that they are running the school for the public benefit. Trustees must take action to ensure that the school does not solely benefit those who pay full fees. It is up to the trustees to determine how this is achieved.
Trustees of school charities have a responsibility to ensure that they run the school for the public benefit
Almost all ISC schools are engaged in collaborative work with local children, schools and communities. Common ways include bursaries and scholarships, coordinated work with local schools, and a wide range of engagement activities beyond the school gates.
Read more about the public benefit work our schools do in Schools Together.
87% of ISC schools are in mutually beneficial partnerships with state schools
Independent schools educate hundreds of thousands of children each year who are entitled to a place at state-funded schools. There are over 500,000 children at ISC schools who would be eligible for places at state schools. In a report carried out by Oxford Economics for ISC, it was found that the cost of providing these additional places would be around £3 billion per year. This annual saving for the tax payer is the equivalent of building 460 new free schools every year.
Read more about the Impact of ISC schools on the British Economy in a report prepared by Oxford Economics.
More than 227,000 FTE jobs in Britain are supported by ISC schools
Independent Schools and Tax
More than 1,000 ISC schools are not-for-profit businesses with charitable status. They are a small part of more than 84,000 educational charities that are registered with the Charity Commission. Academies and free schools are charities, as are the vast majority of sixth form colleges, universities and colleges of further education.
Charitable status significantly predates the modern taxation system, but all charities pay tax and independent schools are no exception. Charities benefit from tax exemptions and reliefs, but estimates of charity tax reliefs are inherently unreliable. There are at least 18 different taxes that can affect charities, the single largest category being employer NICs, followed by irrecoverable VAT.
VAT alone is estimated to cost the charitable sector between £1 billion - £1.4 billion each year, all to the benefit of the Exchequer. Unlike academies, independent schools are unable to reclaim VAT on costs associated with educating their pupils.
The vast majority of ISC independent schools are not-for-profit businesses with charitable status