Prep schools facing scrutiny from the Charity Commission should not rush to supply more bursaries to show they provide "public benefit", a leading figure in the sector has said.
David Hanson, chief executive of the Independent Association of Prep Schools, has warned its members they could create a "self-fulfilling prophecy" of staff cuts, closures or sell-outs to profit-making chains if they overstretch themselves or raise fees to fund free places.
Instead, he says schools should "continue as usual" while the independent sector thrashes out the issue with the Charity Commission.
This year, hundreds of independent schools are being asked to demonstrate they provide a wider public benefit, or face losing their charitable status. Official guidance says this could be in the form of sharing facilities with state schools or sharing staff expertise.
But earlier this summer, many independents were alarmed after two test- case schools failed the public benefit test, seemingly because they put less than 1 per cent of their income aside to fund places for poor pupils.
St Anselm's prep school in the Peak District complained that it had been unfairly judged by inspectors, whom they say had not taken into account its hard work in the community.
Another prep, Highfield Priory near Preston in Lancashire, also failed the inspection, which was carried out under the 2006 Charities Act.
Many small preps, running on tight margins, argue they are much less able to provide bursaries than big institutions such as Eton College or Harrow, which have huge fundraising capacity.
Raising fees to fund free places during a recession could also put off their paying parents, threatening the schools' existence.
Mr Hanson told The TES: "Many schools will have read the findings and feel they had better get on and provide more bursaries, but I advise them to wait as the many good things they do could be sacrificed in the rush.
"Many of our schools do a huge amount of work with their communities, but we are advising them to wait until we have finished discussions with the Charity Commission.
"There are some real dangers of unintended consequences here. It would be a travesty if not-for-profit schools were taken over by profit-making companies to meet the demands of the Charity Commission.
"We feel that the way they are being judged is unreasonable."
Echoing David Lyscom, chief executive of the Independent Schools Council, Mr Hanson said he would consider legal action against the commission if an agreement could not be reached.