A new Labour government will impose VAT on boarding as well as independent school fees should it be elected.

It had been thought boarding fees could remain exempt from the tax because they could be defined as ‘welfare services’ under VAT law, and therefore separate from education, defined as the taxable product.

However, sources at the Labour Party told the Financial Times that boarding fees will incur VAT under the new regime because they are “connected to the principal supply of education”.

Epsom College in Malaysia’s chief executive Mark Lankester said: “Our research suggests that if the VAT policy is implemented, many British parents would have to look at other types of schools and many would have to consider overseas schools as well.”