Private schools, faced with losing their charitable tax breaks, are threatening to withdraw inside their gates and stop helping neighbouring state schools.
They are furious that the Charity Commission looks set to stop recognising their work, such as maintaining historic buildings and training teachers, as a "public benefit".
From next year, the country's independent schools are likely to have to prove they are helping the poor - not just those who can afford their fees - to justify a reported pound;100 million in annual tax breaks. If they cannot do so, they risk seizure of their assets, including buildings and grounds, which would be transferred to another education charity.
The threats to retreat by the independent sector come as the Charity Commission last week ended its second consultation on the position of fee-charging charities and what they should do to keep that status.
The schools' last-ditch threat is designed to be heard by ministers who have been working to enlist the assistance of private schools in sponsoring academies and supporting nearby comprehensives.
Matthew Burgess, the acting chief executive of the Independent Schools Council (ISC), said the Government was "keen to draw on the education DNA of our sector", before adding the warning that "prescriptive regulations promote minimum compliance".
Dame Suzi Leather, chair of the Charity Commission, played down independent schools' fears of losing their tax breaks, saying they should have nothing to fear from the public-benefit test. "We will be proportionate in our approach and will work with any schools that have difficulties," she said.
The council has written to the Charity Commission on behalf of 1,057 member schools that are registered as charities. It says the commission is narrowly interpreting the "public benefit" as subsidising private-school fees for poor children.
Those fees have risen by 40 per cent in the past five years to an average of pound;10,239, according to Halifax Financial Services. But a third of the 511,000 pupils at the schools receive subsidies to help with fees.
If schools are forced to pay more in means-tested bursaries, they will no longer be able to afford to support the community in other ways, the council says.
Schools will be forced into "conservative ways of thinking about their community links." It suggests a boys' school would be constrained by its charitable aims from allowing a co-ed state school to use its football or hockey pitches, or the local girls' swimming club to use its pool.
The council says its members already save the state system pound;2.5 billion - the cost of educating more than half a million pupils, maintaining historic buildings and grounds, contribute to the national good by educating children to the highest level, and inducting 1,200 trainee teachers a year.
But critics demand independent schools be made publicly accountable, as state sector schools are. They say independents should be forced to take children in care and those with special needs statements.
The Education Review Group, which includes left-of-centre academics and activists, says independent schools should be penalised for poaching teachers and for offering bursaries that "cream off" the most able pupils from state schools.
As well as the pound;100m charitable tax relief, private schools with charitable trusts also get rate relief, stamp duty exemption and Gift Aid.
"The capital value of the charitable assets owned by many of the most prestigious and successful schools dwarfs the 'tax breaks'," the review group said.
The National Union of Teachers says private schools should earn tax breaks by providing neighbouring state schools with free tuition, exam preparation and staff exchanges.
WHAT SCHOOLS MAY HAVE TO DO TO PROVE CHARITABLE STATUS
- In the past, any charity that promoted education was presumed to be meeting its obligation to serve the public benefit. By registering as charities, independent schools obtained pound;100 million in tax breaks.
- But the Charities Act 2006 requires independent schools to prove that their aims are for the public benefit. That means helping poor children, not just those who pay.
- The Charity Commission is to finalise its guidance by the end of this year. The draft proposals suggest providing more means-tested bursaries, or loaning teachers and facilities to state schools.
- If there is more "detriment" than "benefit", then an organisation's aims would not be charitable.
- Critics of independent schools say it is not enough to offer scholarships and bursaries to poor children because cherry-picking the brightest children from the state system has a bad effect on maintained schools.
- Independent schools have threatened legal action against the Charity Commission if it finds against independent schools' charitable status. They say they do offer a public benefit and should not have to raise fees of their students to offer free places to others.
- Independent schools' trustees will have to explain how their charity serves the public benefit in reports at the end of this financial year - in most cases, March 2009.
- If a school cannot show a public benefit, the Charity Commission can seize its assets and transfer them to another education charity.
- Schools can appeal against any adverse decisions to the new Charity Tribunal, and would be expected to do so.