Schooled on tax and Human Rights: Government successful in private schools VAT challenge
18 June 2025
In ALR and others v Chancellor of the Exchequer [2025] EWHC 1467 (Admin), the High Court has dismissed a challenge against the government’s manifesto policy of adding VAT to private school fees. The claimants were a group of students, parents, and schools. Some of the students required specific schooling because of (inter alia) special educational needs and religious convictions; all claimants sought a declaration that the VAT addition was incompatible with the European Convention of Human Rights. Specifically, they argued that imposing VAT was incompatible with Article 2 Protocol 1 (right to education) and 14 (protection from discrimination).
This dismissal of the judicial review challenge represents a significant ruling on the interplay between fiscal policy, human rights law and the allocation of resources for education.
Background facts and law
Sections 47-49 of the Finance Act 2025, under challenge in this case, impose value added tax (VAT) on private school fees, as foreshadowed in the Labour Party Manifesto in 2024. In these three linked judicial review claims, the claimants were children attending private schools, the parents of some of these children and four entities which run private schools.
The school claimants were denied standing to bring the A2P1 claims, as this right applies only to individuals. The claimants sought declarations of incompatibility under the Human Rights Act 1998, arguing that Sections 47-49 of the Finance Act 2025, which imposed 20 % VAT on private school fees) violated the following provisions of the Convention:
- 1 Article 2 of Protocol 1 (A2P1): this guarantees the right to education, particularly for people, the claimants argued, with special educational needs, religious education requirements, or gender-specific requirements; and
- Article 14: this prohibits discrimination in the enjoyment of Convention rights. The claimants alleged indirect discrimination against the above groups
The Court’s decision
It was acknowledged that the challenged provisions interfered with Convention rights and made private school unaffordable to some parents. However, the court found that the government was entitled to balance this detriment against benefits (such as the revenue raised by the tax rise) and that the law fell within its broad margin of discretion. In particular:
A2 P1 – Right to Education
The court accepted that the VAT policy would cause some pupils to leave private schools due to affordability. However, it emphasised that this Article does not guarantee a specific type of education (whether religious or focussed on special educational needs) and noted that state schools remained accessible. The right to education is unusual among the rights typically litigated in England and Wales in that it typically involves the deployment by the state of limited public resources (more common to disputes about economic and social rights, rather than civil and political rights).
This requires the state to make a series of policy choices about the organisation of the educational system, some of which are likely to be controversial. That is why the drafters of the Convention have framed the right conferred by A2P1 as a right of access to the educational system existing at any given time and as excluding any obligation to establish at their own expense or subsidise education of any particular type or at any particular level (see paras 149 – 225 of the judgment. It is generally sufficient for the purposes of A2P1 if there is a mainstream state school a child can attend [paras 57-58]
The government parties were wrong to say that A2P1 would in principle permit the prohibition of private schools altogether and therefore wrong to say that A2P1 was not engaged at all [para 59]. However, the claimants correctly accepted that the imposition of a payroll or property tax would not “impair the very essence of the right” even if its result was to cause fees to increase by 20%. This showed that A2P1 implies no duty to refrain from all acts which might hinder access to private schools. There is no principle in the Strasbourg case law that justifies singling out a measure imposing a tax on the fees charged for educational services – alone among state actions hindering access to private education – as impairing the very essence of the A2P1 right [paras 60-65]
2 Article 14 – Discrimination
While the policy disproportionately affected pupils in faith schools, single-sex schools, and those with special educational needs, the court found the discrimination justified. The government’s aim of raising £1.5 – £1.7 billion annually for public education was deemed legitimate, and the policy was “proportionate” to this aim.
There was some discussion of the schools’ ability to bring a claim under the property right, Article 1 Protocol 1. This was rejected outright. To engage A1P1, it is not enough that the challenged measures make it more difficult for some customers to continue the relevant services. This means that there is not interference for the government to justify. However, if justification were required, the state’s margin of discretion would be wide. That being so, the conclusion that the challenged measure was justified for the purposes of A2P1 entailed that it was also justified for the purposes of A1P1 [para 245].
The President of the KB Division, Newey LJ and Chamberlain J, giving a unanimous joint judgment, emphasised parliamentary latitude in fiscal matters, stating that the courts should not second-guess policy decisions where there is a “rational connection” between the measure and its objective. They highlighted that the financial burden on families and schools was outweighed by the broader public benefit of funding state education.
Implications of the judgment
This ruling is the latest example of the courts’ reluctance to interfere with taxation policies even if they come near to breaching the human rights set out in the Convention. It is not enough to demonstrate disproportionate impact on the individual; the claimant must establish lack of rational connection to legitimate aims, those aims being raising revenue, ensuring fairness, protecting those with acute needs and minimising the administrative burden and the potential for abuse. The process undertaken by the government was determined to provide a rational basis to conclude that the measure would lead to a net revenue gain [paras 109-115].
As the court put it:
“As to proportionality, the challenged provisions are in the field of social and economic strategy and taxation policy. Their aim was redistributive. For all these reasons they attract a broad margin of appreciation at the international level. At the domestic level, the challenged provisions enact a manifesto commitment and were debated in Parliament, where all the objections now advanced by the claimants, and others, could be and were made….The measure takes the form of primary legislation, enacted very recently. All these factors point to a very broad margin of discretion at the domestic level”
The parties may appeal – there is a lot of money at stake here – but this ruling sets a high bar for human rights challenges to taxation. And there is precedent for this approach in previous judgements involving education: Charedi Jewish children attending independent faith schools [paras 149-160]; Muslim children attending independent faith schools [paras 165-168]; Evangelical Christians [174-176]; French national children attending a French lycée [paras 181-185]; girls who have suffered sexual harassment and abuse [paras 190 – 195] and children with special educational needs but no “Education Health and Care Plan” [paras 208-225].
Rosalind English is an academic consultant member of 1 Crown Office Row
Jeremy Hyam KC acted for the Claim 2 claimants, David Manknell KC and Rajkiran Arhestey acted for the Speaker of the House of Commons, and Matthew Donmall acted on the team representing HMRC, the Chancellor of the Exchequer and the Secretary of State for Education. None were involved in this piece.
