P11D – should the employee pay NI on Private School Fees

Schoolchild writting on blackboard.

As with so many tax issues, the paperwork will determine the answer.

Let’s assume your childs school fees are Β£10,000 a year that means you will need to earn Β£17,241 per year (based on paying 40% tax and 2% NI) over 10 years that’s Β£172,414 per child, that’s a lot of fees.

So its no surprise that some parents ask their employer to pay the bill and try to save the employees NI but this can go badly wrong as demonstrated in Ableway Ltd v IRC SpC 294….

Mr W and his wife B were directors and major shareholders of Ableway Ltd. The company’s registered office was the home address of W and B. They arranged for the company to pay their two sons’ school fees, although in an undated letter, they undertook to pay the fees in the event of the company failing to do so.

The Revenue argued that the liability belonged to W and B, and that they had accepted this liability by signing the school entry form. Furthermore, the discharge by an employer of an employee’s pecuniary liability was earnings. The school bursar also confirmed that the parents were liable to pay the fees. He said that the invoice was sent to the person responsible for the fees, but that the parents remained liable to pay them. In the event that the school ever had to take action to recover payment of fees, it would sue the parents, relying on the signed entry form and signed deposit form.

HMRC have guidance on the following situations:

Basically if the company contracts directly with the school and the school confirms in writing that the company is responsible for all fees in all circumstances then the employee will not have to pay employees NI.

This is explained clearly by Indicator – Paying for Education

This saves the employee the 2% NI in our earlier example.

Another idea from Indicator is to have the benefit against the spouse with the lowest tax rate.






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