Several private schools, as well as some pupils and their parents, have launched a legal challenge over the government imposing VAT on private schools.
The claimants, which include children and families at faith schools and families who have sent their children with special educational needs (SEN) to private school, are taking the legal action against the Treasury.
They claim the policy of applying VAT to fees is discriminatory and a breach of human rights law.
The Treasury is defending the challenges, with HMRC and the Department for Education (DfE) also taking part.
Dozens of supporters of the challenge appeared at the High Court in London for the first day of the hearing on Tuesday.
Lord David Pannick KC, representing one group of children and their parents, said that for some children currently in private schools, their needs are not met by state schools in their area, or at all, but the new law applies “irrespective” of a family’s need.
“The application of the law does have a damaging effect on individual children and their families,” he added.
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As well as religious beliefs and SEN, the High Court was told some children are privately educated because of a need for a single-sex environment because of previous abuse, or because they are only temporarily in the UK and need to be educated in line with their home national curriculum.
Jeremy Hyam KC, representing two children with SEN in private schools, told the court that at least 35,000 children could be displaced from private schools and into state institutions because of increased costs.
He continued in written submissions: “That displacement will have a particularly prejudicial impact for displaced SEN children compared with those entering the state sector who do not have SEN.”
He said that provision for SEN pupils in the state system “is in crisis” and that the transition “is likely to have a highly detrimental effect” on pupils who have to move schools.
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Bruno Quintavalle, representing four small Christian schools and parents who have sent their children to them, said the “ill thought-out proposal introduced in haste” placed parents in “impossible positions”.
He said in written submissions: “The small independent schools that are likely to suffer most from this are those that serve minority religious communities.”
He continued: “The claimant parents are not prepared to send their children to state schools, because the secular education provided by the state sector would oblige the children to be educated in a way contrary to the parents’ religious convictions or would otherwise expose their children to risks which they cannot in conscience assume.”
But Sir James Eadie KC, representing the Treasury, HMRC and the DfE, said abolishing the VAT exemption for private school fees was a prominent feature of Labour’s manifesto at the last general election and is expected to yield between £1.5bn and £1.7bn per year.
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He continued in written submissions: “Parents wishing to opt out of the system of universally accessible state-funded education are free to choose any private education for their child that they can afford, or to educate their child at home.
“The fact that measures of general application, such as taxes, minimum wage laws, national insurance, etc, affect the cost of providing such a service, and therefore its purchase price, does not make those measures an interference with freedom to offer or receive private education.”
The hearing before Dame Victoria Sharp, Lord Justice Newey and Mr Justice Chamberlain is due to conclude on Thursday.
A decision is expected in writing at a later date.
