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academies and VAT recovery – new powers

16 December 2010

On 9 December 2010, HM Treasury 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.

The announcement focuses on Academies recovering VAT which they incur on incoming supplies of goods and services, which are then used by the Academy for its non-business activities. Since providing education free of charge is generally a non-business activity, this is a very relevant point for Academies.

At the moment, Academies don’t have the same powers as local authority schools to recover VAT which they incur in this non-business context. Additional grant funding has been available from the government to try to bridge this gap. But from 1 April 2011 the intention is for Academies to be treated in the same way as local authority maintained schools on this issue.

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