Chancellor Rachel Reeves has been accused of "massively underestimating" the scale of a rebellion mounted by the parents of private school pupils.

Experts suggest that the Chancellor did not anticipate the hundreds of millions of pounds of school fees paid in advance last year, before the tax raid came into force on January 1, 2025.

Some £515million flooded into the advance fee schemes of the top 50 independent schools, allowing parents to avoid paying the 20 per cent levy imposed by ministers.

The money is expected to fund school costs one or more years before they are due.

Internal Treasury forecasts suggest this significantly eclipses Government predictions.

Reeves announced last year that all fee prepayments from July 29 would be subject to VAT as she tried to prevent any possible tax loophole.

The Treasury expected to raise £90million in VAT from fees in advance schemes made beyond that date, equating to £450million in upfront school fees, as VAT is charged at 20 per cent.

TREASURY |

Rachel Reeves 'massively underestimated' the scale of parents funding private school fees upfront to avoid VAT

The documents show that the Government also considered collecting fee prepayments made from May 22, 2024, when Rishi Sunak called a general election.

Internal Treasury advice indicated that doing so would generate an extra £30million in VAT, meaning £120million would be raised in fee prepayments.

This implies that the Treasury expected parents to pay around £600million in fee prepayments across private schools in the UK.

Private schools' yearly accounts suggest the actual total is likely to be much higher.

The prestigious Eton College received over £50million in VAT from parents ahead of the deadline.

This means that the Treasury would have taken over £10million in VAT from Eton alone.

Treasury officials stated in the documents: "As demonstrated by the small differences in the costings, not legislating back to an earlier date in time does not mean that we expect to lose significant amounts of revenue."

It noted that it would be "difficult to justify" trying to retrospectively tax free prepayments, "given the legislation would be giving effect to the policy before the details… were known".

Eton College |

Eton College alone would make £10.5million in VAT

Executive director at the Institute of Economic Affairs noted: "It does appear that the Government massively underestimated the behavioural effect of introducing VAT on private school fees.

"Prepayment has clearly been far more significant than the Treasury anticipated when preparing the policy, but I suspect that is just one part of a wider picture. More children have been withdrawn from the independent sector, and more schools have closed, too."

A Government spokesman said: "The Office for Budget Responsibility has already factored in the increased use of pre-payment schemes in its revenue forecasts.

"Removing tax breaks for private schools is expected to raise £1.8billion a year by 2029-30. This funding will help us recruit 6,500 new teachers and improve standards in state schools, which educate 94 per cent of children."