Fulneck and Queen Margaret’s Schools owed combined £6m at time of closure, with issues predating VAT changes
Two private schools in Yorkshire which closed down this year had suffered years of financial problems prior to the removal of VAT exemptions, and owed a combined total of just under £6m when they collapsed, analysis of financial documents has revealed.
Queen Margaret’s School, near York, and Fulneck School, in Pudsey, both announced their closure earlier this year. Analysis of financial documents released by the schools, administrators and liquidators has now revealed that the schools together owed a total of £5.9m when they shut down.
It comes after changes to VAT rules which were brought in at the start of this year by Chancellor Rachel Reeves, in which VAT exemptions for private schools were removed. The move made all education and boarding services provided by private schools subject to VAT at the standard rate of 20 per cent.
The changes have been blamed for a string of private school closures across the country.
Queen Margaret’s School, a private boarding and day school for girls, owed a total of £2.4m when it appointed administrators in July, according to documents posted on Companies House.
According to a document filed by the administrator, the school had been “operating at a financial deficit” for several years in the lead up to the administration, with a deficit of approximately £936,000 in 2022 and £1.29m in 2023.
The document states: “Following the news that VAT would be chargeable on school fees from 1 January 2025, the governors and senior leadership team implemented a series of cost-saving measures. “Despite these efforts, with costs of approximately £300k being saved during the year, by February 2025 the company still had a projected deficit in the region of £820k.”
In its most recent full accounts, made up to August 31 2023, the school said that despite income from fees falling in line with expectations, it had faced a number of major issues.
The accounts read: “Much higher than anticipated inflationary pressures on all areas of our operating costs, together with a reduction in predicted income from summer activity, has resulted in a deficit before the cost of generating funds, interest and depreciation that is £336,000 greater than we forecast.
“This, coupled with increased interest rates, has resulted in a disappointing financial outcome and a final deficit £456,000 greater than forecast.”
The premises of Queen Margaret’s School is now for sale with an asking price of £5m.
Fulneck School, which had been teaching for over 270 years, owed just under £3.5m when it appointed a liquidator in July. A large portion of this debt was owed to its parent organisation, the Moravian Union, which provided £1.5m of loans to support Fulneck between 2020 and 2023.
According to the company’s latest accounts, made up to August 31 2023, the school made an operating loss of £271,450 in 2023, following on from a loss of £409,631 in 2022.
A letter sent to parents by the school’s chair of governors, said: “This decision comes after exhaustive efforts to secure the school’s long-term future, including significant financial support from the Trustees in recent years. Unfortunately, despite these efforts, we have faced a sustained decline in pupil numbers since 2012.
“External challenges-such as the impact of the pandemic, the rising cost of living, and changes within the independent education sector-have further compounded these difficulties.”
Mount St Mary’s College, just outside Sheffield, also announced its closure earlier this year. The school said at the time that it had faced “increasing financial pressures” since 2015.
The school has not yet released financial documents relating to its closure.