Academy Schools given increased VAT recovery opportunities


In December 2010 it was announced that, from 1 April 2011, Academy schools should be put on the same footing as local authority maintained schools in terms of their ability to recover VAT from HM Revenue & Customs in certain situations.

Tim Fife, Director of VAT at accountants Armstrong Watson, advises:

“The measure affects the following types of academy schools:

  • Any school that is an existing academy;
  • Any school currently maintained by the local authority that elects to become an academy;
  • Any newly formed academy school which is not under local authority control; or
  • Any independent school that elects to become an academy.

Previously academies didn’t have the same powers as local authority schools to recover VAT incurred with respect to non-business activities and additional grant funding was available from the government to try to bridge this gap.  However, from 1 April 2011 academies are being treated in the same way as local authority maintained schools on this issue and will be able to recover VAT on purchases made to support their non-business activities (principally the provision of free education), which would have ordinarily been recovered by the local authority.

Following this change, academies will need to be in a position to:

  • Identify the optimum date of VAT registration;
  • Implement their VAT registration;
  • Understand and identify any pre-registration input tax reclaimable;
  • Classify the VAT liability of their sources of income;
  • Identify and attribute their costs to their sources of income;
  • Have a computer system set up to manage the required posting;
  • Understand and implement the special refund scheme;
  • Complete and submit, on time, their VAT returns.

ArmstrongWatsonhas already provided training in this area and would be happy to assist academies or schools in the process of converting to academy status, not only during the period of transition, but also on an on-going basis.”

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