Navigating VAT: What Academy Trusts Need to Know

As academy trusts move away from local authority control, they’re now responsible for managing their own VAT affairs. This shift brings both challenges and opportunities. SJC Chartered Accountants is here to simplify the complexities and support trusts in meeting their obligations while maximising recovery.

VAT Refunds via Form 126

Academies can reclaim VAT on educational (non‑business) costs using HMRC’s Form VAT‑126—something state schools never had to apply for themselves.

When to Register for VAT

If taxable business activities—such as facility hire, catering, sports tuition, uniforms or classroom lettings—exceed the £90,000 threshold (as of April 2024), a trust must register for VAT. Even below that threshold, voluntary registration can sometimes offer financial advantages.

Partial Exemption & De Minimis Rules

Academies often carry both exempt and taxable supplies. That requires partial exemption calculations to determine how much VAT can reasonably be reclaimed. If exempt activity is minimal, the de minimis rules may allow full recovery—but accurate apportionment is key to compliance.

Capital Projects & Property VAT

Major building and refurbishment projects (costing over £250k) fall under the Capital Goods Scheme (CGS), potentially spreading VAT recovery across ten years. Trusts also need to watch for zero‑rate relief on annexes used for educational purposes—where at least 95% of use is non‑business.

VAT Risks: Where Trusts Go Wrong

Failing to declare output VAT on commercial supplies—such as equipment sold to parents—can trigger HMRC enquiries, penalties, and back‑dated tax liabilities. One trust was penalised for not declaring VAT on laptops sold to students.

Strategic Advice for Academy Trusts

At SJC, we help trusts by:

·      Monitoring taxable income to trigger VAT registration appropriately;

·      Handling VAT‑126 claims and apportionment reviews;

·      Advising on partial exemption calculations and applying for special methods when needed;

·      Planning VAT-efficient structures for capital or commercial activities;

·      Offering payroll and IR35 compliance checks for staff and contractor arrangements

How SJC, Chartered Accountants Can Help

From Academy Schools to Multi-Academy Trusts, we offer tailored VAT support:

·      Strategic planning for trading activities and capital developments

·      Expertise in reclaiming allowable VAT and avoiding costly missteps

·      Financial review and VAT health checks to spot risk early

Get in touch to learn how SJC can help your academy trust stay compliant, mitigate risk, and reduce your VAT burden.