Schools funds, PTAs and VAT

We have recently been asked a few questions concerning the recovery of VAT on purchases for the school, when the funding comes from one of these ‘unofficial’ accounts.

Firstly, it’s worth clarifying the distinction between a School Fund account which is part of the academy trust, and one that is not. Many local authority schools have a separate school or voluntary fund accounts to keep other income away from the main day to day school account. If an account like this is under the control of the academy trust, then all income, expenditure and year end balances should be included in the academy trust’s year end accounts. If control is held outside of the academy, which is often where a voluntary fund, for example, is established as a registered charity in its own right, usually with some independent trustees, then there is no need to include the fund as part of the academy.

It is usually clear that PTA organisations are outside of the control of the academy, and this article really focuses on the interaction between an academy and a separate account like this or a similar school fund account. It is perfectly acceptable to reclaim VAT on expenditure incurred through a school fund which is included within and under the control of the academy.

An academy trust is only permitted to reclaim VAT on invoices raised to the trust, and which relate to trust expenses, and it is therefore important to approach the idea of, for example, a PTA funding equipment or another cost in the correct way.

The tax efficient approach, and the one that will avoid any issues at a later date, will be for the academy trust itself to purchase the equipment, and then recover the VAT. The PTA can then make a donation to the trust to cover the net cost using funds that have been raised. It is important that such a transaction is noted as a donation and included within voluntary income; it is not a recharge and there is no need for the academy to raise an invoice to the PTA.

As a summary, academies should ensure that:

  • only the net cost is donated from the PTA (unless they wish to donate more)
  • the invoice is made out to the trust and the trust should place the order;
  • the trust will need to own the title of the goods and only use them for school purposes;
  • you maintain clear records.

For further information please contact one of our academy school specialists at your nearest location.

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