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Academies - the impact of new VAT legislation
by Mark Stothard on 20 January 2012
As a result of the Academies Act 2010, primary, secondary and special schools can now apply to become an Academy – and increasing numbers are doing so.
Many schools are finding that, although this gives greater freedom, the conversion also brings with it a range of additional responsibilities and issues to be considered.
Possibly one of the lesser known issues which can potentially have a major impact has resulted from changes to VAT legislation from 1 April 2011, in that the VAT position for Academies changed dramatically from that date as VAT can now be reclaimed on costs associated with educating pupils.
Consequently specialist VAT advice will be needed for registration, setting up of necessary accounting systems to capture relevant information, preparation of quarterly returns to ensure accuracy and consideration of various issues including apportionment of input VAT, school buildings repair, maintenance or alterations etc etc
The potential benefits of doing this can be illustrated by the fact that Haines Watts specialist VAT team has recently been successful in obtaining a six figure VAT refund for an Academy submitting their first return. The VAT repayment claim was dealt with inside a month, with no issues or problems raised by HMRC.
Legislation affecting Academies is constantly changing and it would appear that many schools do not fully appreciate the full significance of converting to Academy status. Hence it is crucial that the correct advice is taken, not just in specialist areas such as VAT, but also in respect of a range of reporting and accountancy requirements under the Charity and Companies Acts regulations.
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