Trading income and tax risks

The knock-on effects of the imposition of VAT on independent school fees continue to bite, with The Times reporting that 54 schools had either closed or announced plans to close between January and July 2025. Typically, 50 schools close annually, but recent VAT changes and the less well reported removal of business rates relief have significantly increased this rate and contributed to a nearly 2% drop in independent-educated students, almost offsetting the 2.1% rise recorded between 2023 and 2024.

Faced with increased costs and falling student rolls, schools have little choice but to look to develop additional revenue streams, and a further Times article details the number of schools that now offer their premises for weddings and similar private functions. Some schools have offered wedding venues for some time, but this has often been restricted to alumni rather than being available to the public at large. 

For independent schools that are constituted as charities, income from trading that is not classed as “primary purpose” will be exempt from corporation tax provided it is less than £80,000 per annum. If that £80,000 income/turnover threshold is breached then all profits arising from that trade will be subject to corporation tax at 25% for the 25/26 fiscal year.  A further complication is that charity law does not permit charities to carry out non-primary purpose trade solely with the aim of fundraising. 

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