The UK government's imposition of VAT on private school fees will worsen existing tensions and complicate negotiations for couples in divorce. The author examines what choices are available and the likely challenges.

The new UK government has added value-added tax to private schools' fees, a policy change that the administration justifies by reference to long-held views about egalitarianism and the dislike of non-state forms of education. Those who object say that people who pay school fees have already paid taxes towards state education, and are being penalised in the name of the politics of envy. This is controversial terrain!

Regardless of the rights and wrongs of what the government is doing, where parents are concerned, the change raises a number of issues, and that is certainly the case when parents divorce and/or separate. The author, Nina Lake, partner at law firm Howard Kennedy, considers the details. The editors are pleased to share this information; the usual disclaimers apply. Email tom.burroughes@wealthbriefing.com if you wish to enter the conversation. 

Private school fees in the UK are already substantial, often ranging from £15,000 ($19.435) to £40,000 per year, depending on the institution. The UK government's proposal to remove VAT exemption on private school fees has sparked serious debate as the introduction of VAT at 20 per cent would increase these fees significantly. 

For separating or separated couples, this move has the potential to worsen existing tensions and complicate negotiations. Divorce or separation usually involves negotiations over the division of assets, ongoing maintenance arrangements and determination of financial provision to make sure the needs of any children are met. The sudden hike in school fees will add another layer of complexity to these discussions.

Navigating legal considerations for unmarried couples
Unmarried couples face unique legal challenges as they do not have the same rights and protections as married couples. This can complicate financial arrangements following a separation. 

Child maintenance provisions beyond what is covered by the Child Maintenance Services (CMS) – being the statutory base payment for child maintenance – and other financial arrangements for children of unmarried couples are addressed in Schedule 1 of the Children Act 1989. While the welfare of the children will be prioritised, both parents' financial situations can be examined to decide whether private education is a suitable choice in the circumstances. 

Legal challenges for married couples
During the divorce of a married couple the court will also prioritise the welfare of the children including their education. Yet, private school fees may be seen as a luxury by the court and considered to be an expense that cannot be met, even if private schooling has always been the “norm.” 

Even if it were deemed an affordable expense, the increased cost would be likely to impact other areas of the case, including what the correct division of assets should be or the quantum of spousal maintenance payments. Indeed, it is also worth noting that the CMS formula does not automatically include school fees, meaning separate arrangements must be made. 

For instance, divorcing couples can negotiate specific school fee orders, where one or both parents are ordered to cover the cost of the private school fees. If the terms of the order become unfeasible, couples may need to revisit the court to modify the agreement. This can be a burdensome and expensive process, creating additional strain during an already difficult time.

Reaching a solution that works
The government's decision to eliminate the VAT exemption on private school fees will affect all families with children at these schools or planning to send their children to them. For couples who are going through separation or who are already separated, the impact is especially significant. They must handle extra financial pressures alongside emotional and logistical difficulties of parting ways. By exploring alternative dispute resolution methods, seeking legal counsel, and planning finances early on, separating or separated couples can effectively address these challenges whilst prioritising their children's wellbeing.

-- Non-court dispute resolution (NCDR)
NCDR should be considered at the outset of any discussions as well as during ongoing litigation. 

Mediation and collaborative law are effective routes for resolving disputes outside of court. These methods promote cooperation and are helpful for renegotiating school fee-related financial agreements. A neutral mediator or instructing collaborative lawyers can assist parents in reaching an agreement that accounts for rising costs and prioritises the children's wellbeing. 

-- Legal advice and support
Legal advice is essential for understanding rights and obligations, particularly when revisiting court orders or agreements. Lawyers can help couples navigate the process of seeking variations to existing arrangements and ensure that any new agreements are legally binding and equitable. 

-- Financial planning and advice
Couples should consult a financial advisor early in the separation process to manage increased school fees effectively. Advisors can clarify the implications and assist in developing a plan, which may involve restructuring finances, adjusting budgets, or considering alternative educational options if private schooling is no longer feasible. 

The goal should always be to ensure that, despite the increased financial pressure, children's welfare remains a priority.