VAT – Value Added Tax and Academies
There are number of issues around the treatment of VAT for school Academies, Streets Chartered Accountants, educational and school Academy accountants are able to provide advice and guidance.
Academies will not receive a VAT grant, but will be able to reclaim VAT incurred on expenditure relating to the running the School through special provisions announced in May 2011. Guidance notes on the VAT Refund Scheme for Academies were issued in June 2011 as VAT Information Sheet 09/11. To view this information sheet please click here Further information can be found on the H M Revenue and Customs website at www.hmrc.gov.uk.
There are two options for reclaiming VAT on costs incurred in running the Academy.
The Academy may apply to be VAT registered, submitting monthly or quarterly VAT returns to HM Revenue and Customs. As a VAT registered organisation, the Academy must charge and account for output VAT on goods and services it supplies as well as reclaiming VAT incurred.
The Academy can apply for a refund of VAT on costs incurred for the running of the School. This is referred to as a Section 33 claim and limits the Academy to the recovery of VAT on purchases made wholly and exclusively for the provision of education. Section 33 claims can be submitted for a period covering one or more calendar months.
If Academies choose to make a Section 33 claim, they will need to monitor potential VAT liabilities arising from their activities, as they must register for VAT if their taxable supplies exceed the VAT registration threshold. The various income streams should be listed, together with the estimated annual income, in order to assess the VAT implications for each source and for the Academy as a whole.
Output VAT charged and input VAT incurred by Academies will need to be recorded under the following headings:
- Non-business supplies – purchases made wholly and exclusively for the provision of education. This VAT is recoverable under the new concessions for Academies.
- Taxable supplies – sales and purchases relating to taxable supplies e.g. the provision of catering services to other schools
- Exempt supplies – sales and purchases relating to supplies which are exempt for VAT e.g. letting of school premises
- Mixed supplies- purchases made for the Academy covering a combination of taxable and non-taxable supplies e.g. accountancy services
The Academy will need to carry out a partial exemption calculation in order to calculate the amount of VAT that can be recovered.