A confidential letter revealing the fragile financial position of King William's College has been released under Freedom of Information legislation.

The correspondence, from chair of governors Peter Clucas to then Enterprise Minister Tim Johnston, reveals that the introduction of 20% VAT on private school fees has resulted in around £1m a year being paid to the Manx Government.

The cost is being passed on in full to parents from the 2026-27 academic year, although the College is also having to provide financial assistance to some families to allow their children to continue their education.

The FoI request followed the award of £2.25m in taxpayer-funded financial assistance to King William's College by the Department for Enterprise (DfE), despite auditors raising concerns about the group's and its parent company's ability to continue as a going concern.

In the letter, Mr Clucas stresses that the information is confidential, warning that its disclosure ‘would prejudice the College's commercial interests and ongoing engagement with third parties’.

He states: ‘The financial position of King William’s College remains fragile due to a number of factors, including but not exhaustively, the imposition of VAT at 20% on fees which has resulted in c. £1M of net operational funds being payable to the Isle of Man Government annually.’

Mr Clucas explains that the College had absorbed a significant proportion of the VAT burden during the first two academic years to protect families of existing pupils.

‘Although the VAT will be passed on in full to parents for the 2026-27 academic year onwards, a consequential further cost to College has materialised as it needs to provide financial support for some existing families to enable continuity of education for the pupils concerned,’ he adds.

‘The board of directors must now take deliberate action to secure the school's long-term sustainability on the Isle of Man.’

In his letter, dated May 28, Mr Clucas also highlights the College's importance to the Manx economy, employing around 150 staff and helping attract and retain families on the island.

It was announced in April 2025 that King William's College and The Buchan School had secured £2,256,395 through the DfE's financial assistance scheme.

The repayable grant, carrying interest at 1% above base rate from year three, was intended to support the relocation of The Buchan School to the main King William's College campus.

In its FoI response, the DfE confirmed it was aware of the College's financial difficulties when the assistance was approved under a scheme designed to support struggling businesses.

It said: ‘On the basis of the information and evidence available at the time, there was considered to be a credible prospect that the College could trade through those difficulties and return to a sustainable financial position.

‘Repayments are not due to commence until 2029, allowing the College time to implement its cost-saving and growth plans and for the intended benefits of those plans to be realised.’

The former Buchan School site has since been sold to developer Hartford Homes for £6m, with the final instalment due in January 2029.

Mr Clucas states: ‘Our current understanding is that a minimum of 50% of the repayable grant would be repaid upon receipt of the funds from Hartford Homes for the sale of the Westhill site in January 2029 with the remaining grant, if not settled at that time, repayable within five years of the drawdown i.e. by early September 2030.’