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Independent Schools risk losing charitable status

Posted
September 11, 2009
Business Law

Independent schools, most of whom are registered charities and rely on their charitable status to ensure that they are not stung by the tax man, could find themselves losing that status following a series of test cases by the Charity Commission. Evidence from HM Revenue & Customs indicate that the tax breaks received by independent schools are worth approximately £100 million per annum.

The Charity Commission launched the cases after the implementation of the Charities Act 2006. This Act requires those seeking charitable status to prove that they provide "public benefit". Previously, the mere fact that an organisation was providing education was evidence of its entitlement to charitable status. The two schools in question, Saint Anselm's School in Bakewell and Highfield Priory School in Fulwood, ran various initiatives to involve local children and organisations, but were criticised for the number of bursaries they offered. Highfield Priory does not offer bursaries, preferring to keep its fees as low as possible, while Saint Anselm's does offer bursaries, but the number offered was not deemed to be sufficient by the Charity Commission. Both schools now have twelve months to satisfy the Commission or their charitable status may be removed. The ruling has caused convulsions within the independent schools' community. 

The chief executive of the Independent Schools Council, David Lyscom, said "School charities in ISC membership meet the "public benefit" requirement by making excellent education available to a wide range of pupils and prospective pupils for the public benefit. In focusing on bursaries, the Commission have not only downplayed the significance of partnerships with local schools and communities, but also deliberately discounted the wider social benefits that individual schools and the independent sector as a whole provide". The Charity Commission emphasised that, while not the only way of showing public benefit, bursaries were the clearest and most direct means of showing that schools are providing ways for those who cannot afford the fees to access the benefits of the schools. 

They said that they were not proposing to give a standard percentage to be adopted by all schools in order to maintain charitable status, but said that it should be more that tokenistic and that schools should look to the level of bursaries given by schools who successfully achieve the new standard. At the moment, those schools which have been successful have offered between 5 and 15% of their income as means-tested bursaries. While these assessments are only test cases, designed to highlight the new requirements, schools are now reassessing their policies to put them in the best position should they be next on the Charity Commission's list. 

Published - September 2009 This article is provided for general information only. 

Please do not make any decision on the basis of this article alone without taking specific advice from us. stevensdrake will only be responsible for the advice we give which is specific to you.

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