Tax rules forced an academy to waste pound;1 million demolishing and rebuilding a perfectly good sports hall, the National Audit Office report reveals.
The decision was made by the steering group overseeing the building of Haberdashers' Aske's Knights academy in New Cross, south London, to avoid a pound;4.25m VAT bill.
The sports hall, part of the predecessor school on the Lewisham site, was described as "fairly good" by auditors. But keeping it would have meant the whole project being classed as a refurbishment, leading to full-rate VAT charges. The tax does not apply to new buildings.
At a total cost of pound;40.4m, the south London academy is the most expensive to be built so far, partly because of the need to remove Japanese knotweed and asbestos from the site. But the report reveals that the school's sponsor, the Haberdashers' livery company, have paid only pound;295,000 to control it.
The Government agreed to the small sum because of the company's "educational expertise" and its pound;704,500 contribution towards the pound;7m cost of converting Haberdashers' Aske's Hatcham from city technology college to academy.
The auditors are also concerned that VAT rules are preventing academy buildings from being put to maximum community use and have called on government to resolve the tax issues.
Academies cost more to build than other schools and 17 of the first 26 have exceeded their budgets by an average of pound;3.2m. However, the quality of most buildings was assessed by auditors as good.