Published 4 April 2011
As expected, the Finance Bill 2011 introduced legislation confirming that academies will be able to recover VAT incurred on purchases made to support their non-business activities, in the same way that local authority run schools are able to.
Local authorities have historically been able to recover VAT incurred on non-business activities, under Section 33 of VAT Act 1994. As academies are not controlled by local authorities, they were not able to benefit from this refund scheme, and the new legislation addresses this issue, placing academies on an equal footing with local authority run schools.
There will potentially be two ways in which an academy may be able to recover VAT incurred on its non-business activities, depending on whether or not it is VAT registered.
You should be aware that academies are not able to recover VAT incurred in respect of their business activities, under the newly introduced Section 33B. It will only be possible to recover such VAT, if registered for VAT, and in accordance with the normal VAT rules.
The new legislation will affect VAT incurred by academies since 1 April 2011, however it will not be possible to actually recover the VAT until the Finance Bill 2011 receives Royal Assent later in the year.
Should you require any further information or want to discuss how your academy may be able to recover VAT then please get in touch.