Financial Forecasts & Tax Pitfalls in England’s Academy Trusts: What You Need to Know

Why Forecasting Matters

Financial forecasting in England’s multi-academy trusts (MATs) isn't just paperwork—it directly impacts children’s learning outcomes. Recent analysis shows that by 2026/27, 37% of MATs expect reserves to fall below 5% of income, a level flagged as financially vulnerable by the DfE. This erosion of reserves could force trusts to cut vital roles—primary-led MATs may lose nearly 5% of teaching staff and 6% of teaching assistants, leading to larger classes and reduced support for SEND pupils.

Declining pupil numbers—projected to fall by nearly 2% in primary trusts—mean further funding shortfalls, while secondary-majority trusts expect modest growth. Without robust forecasting, trusts risk making harmful trade-offs in staffing, pupil support, or capital investment.

Top Tax and Compliance Pitfalls

Academies and MATs—charities in legal form—face several noteworthy tax risks and opportunities:

·      Trading and corporation tax liabilities: Income from facility hire, uniform sales or staff consultancies may trigger corporation tax once non‑educational trading exceeds thresholds. Setting up a trading subsidiary can shield academy assets and manage liabilities more effectively.

·      VAT registration and partial exemption: Organisations must monitor taxable income (facility hire, catering, etc.), which could breach VAT registration thresholds (e.g. VAT‑85 k) and require partial exemption calculations or apportionment to avoid over‑claiming VAT via VAT126 claims.

·      Payroll exposed—AP and IR35 compliance: Many trusts engage contractors or off‑payroll workers. HMRC scrutiny over employment status and PAYE obligations remains high—any misclassification risk triggers penalties and back taxes.

·      Gift Aid opportunities: Academies qualify as charities and can increase eligible donations by 25% via Gift Aid—but only if HMRC registrations and donor declarations meet strict requirements.

Proactive Action for Trust Leaders

At SJC, Chartered Accountants, we support academy clients in navigating these financial and tax complexities. Key services include:

·      Forecast modelling and financial planning to protect reserves and align staffing to pupil trends

·      VAT strategy, apportionment reviews, and VAT126 recovery

·      Corporation tax risk assessments and subsidiary structuring for non-core income

·      Employment tax health‑checks, IR35 reviews

·      Gift Aid implementation support and compliance reviews

Why This Matters

Education outcomes depend on financial resilience. Trusts that forecast accurately, manage tax risks, and optimise income structures preserve resources for staffing quality, SEND support, and educational investment. Failing to plan creates invisible risks that jeopardise long-term sustainability.

Trust leaders should be asking: Are forecasts accurate and updated regularly? Have trading risks been assessed? Are employment arrangements fully compliant? Are tax and VAT claims robust and defensible?

Want support refining your forecasts or safeguarding tax compliance?

Get in touch with our specialist team to build a strategy that protects reserves, strengthens compliance, and protects your core mission of educational excellence.