As independent special schools brace for the implementation of VAT in January 2025, the clock is ticking. With only 7 working weeks between the Autumn Budget and the rollout of this new policy, significant planning is necessary to ensure schools are fully ready for these changes.
In this guest blog, we consulted the experts at VWV, who have a dedicated team for Special Schools and Colleges. Within this team, they have put together a VAT taskforce to help schools during this important implementation phase. Legal Director Susie Luckman and School Adviser Nikki Miller highlight the challenges of VAT compliance for independent special schools as the January 2025 deadline approaches. They discuss key points, including the need for schools to manage partial exemptions and the specific services they offer. Their advice stresses the importance of taking quick and strategic action to reduce risks, avoid costly mistakes and ensure schools are fully ready for VAT.
To support NASS member schools, VWV is hosting a free webinar on Thursday, 7th November. To book your place, visit: https://www.nasschools.org.uk/events/preparing-independent-special-schools-for-vat-changes-addressing-the-risks-and-challenges/
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Does VAT apply to special schools?
The short answer is yes - unless you are an academy or a non-maintained special school, it is highly likely that VAT will apply to the fees you charge, either to the local authority, or to individual payers.
This means most special schools will need to be VAT ready for January 2025. So time is short!The current guidance suggests that schools will also need to consider being partially exempt businesses, which adds a further layer of complexity.
The special school sector is inhomogeneous in the unique provision that it offers children. This means special schools will also need to consider the interaction between education, health, care and welfare when applying VAT.
It is unlikely a special school will simply be able to add 20% to its headline fee and be VAT compliant, without having undertaken the appropriate analysis.
Should I be worried?
VAT law is complex.
There are two issues which make applying VAT to fees a difficult task for schools:
- Existing VAT principles have been established over the years through ever-evolving case law - however there is no case law yet for the education sector; and
- The onus will be on you to ensure you have correctly applied VAT to the relevant parts of your fees. More importantly for many special schools, the onus is on you to ensure you correctly reclaim the correct amount of input VAT.
The guidance issued is not clear on which services will definitely be VAT-able and which will be exempt (or zero-rated, or outside the scope of VAT etc…). Schools will have to make their own decisions on how, and to what extent, VAT is applied to fees in time for 1st January billing. Some of these decisions will be easy, but others will be more complicated and may involve you taking a calculated risk-based approach to the VAT treatment of a supply you offer.
So what is the risk?
The risk of getting it wrong lies with the school, along with paying any under-reported VAT, accrued interest and any penalties that may apply. For special schools, the main risk may lie in reclaiming more VAT than you are entitled to, and this error may not be discovered for a number of years, by which time the liability (plus interest and penalties) could be considerable. So there is work to do now to try and be as prepared as possible to minimise the risk of under-reporting.
What can we do?
VAT compliance starts at the top. Schools should be ensuring they have effective decision making protocols in place and clear delegation of authority. Risk management tools should be updated, procedures should be monitored and reviewed, and staff should have all the resources, training, time (!) and access to advice that they need to tackle this new challenge.
There is lots to do before the January invoices can be issued. This is a big change to how schools operate, and you should be taking action now.
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Susie Luckman, Legal Director, VWV
Nikki Miller, Schools Adviser, VWV
For more information please visit - https://www.vwv.co.uk/special-schools-lawyers
At VWV, we have formed a multi-disciplinary taskforce to help guide schools through this implementation phase. Susie Luckman is a Legal Director with 16 years' experience advising independent and state schools on a variety of issues. Nikki Miller is an accountant and after a first career in the military, spent 15 years as a bursar at two independent schools, before joining VWV as their Schools Advisor. She has recently set up a consultancy arm at VWV, Narrow Quay Solutions, to offer accountancy services to charities and schools.