VAT recovery on expenditure for VA Schools
It has been highlighted that there is a significant amount of VAT being initially accounted for by VA schools which is non-reclaimable in accordance with HMRC guidance for Local Authorities (LA) and Voluntary Aided (VA) schools in England. The guidance stipulates VAT may not be recovered on capital works for which the Governing Board (GB) is responsible.
HMRC require that VAT be recorded with its correct treatment and carry out regular audits to ensure that organisations are managing their VAT treatment correctly. HMRC have authority to issue fines and other penalties for organisations that they feel are not compliant.
Where VAT is deemed unreclaimable the Council's VAT return has to be adjusted to account for these amounts so that the Council has correctly met HMRC's compliance with VAT regulations.
In order to help mitigate the risk of VAT being reclaimed whereby the Council is not entitled to do so, please find below areas that have been highlighted as risk areas. VAT should not be reclaimed back for expenditure incurred on such activities by VA schools where the total expenditure for the project is over the schools de-minimus limit of £2,000:
- Installation of WiFi systems including routers - this includes "Broadband" installation costs over £2,000 but not rental charges, which are deemed okay for VAT recovery
- Fixed furniture & fixtures - including ovens, outside tables, outside playground equipment and fixed storage units
- Installation of CCTV
- Installation of alarm systems
- Improved security works
- Boiler replacement (repair & maintenance works are okay for VAT recovery but not complete replacement)
- Lighting replacement (repair & maintenance works are okay for VAT recovery but not complete replacement)
- Signage (this forms part of the premises)
- Canopies
- New or replacement flooring works (carpets, vinyl etc)
- Playground re-surfacing
- Artificial grass
- Any major refurbishments and alterations (only repair & maintenance works (including redecoration) are allowable for VAT recovery)
Please note that this list is not an exhaustive list of works for which VAT is not recoverable. It has been compiled based on areas for which VA schools have accounted for VAT but subsequently found to not be eligible for recovery. The full HMRC guidance on VAT recovery in relation to VA schools can be found using the following link on Infospace VAT (Value Added Tax) | Infospace
