Taxman to spare action zone cash

29th October 1999 at 01:00
GOVERNMENT officials have secretly promised to stop the taxman grabbing millions of pounds of education action zone funding, according to zone chiefs.

They say civil servants have given private assurances that they will find a way to stop Customs and Excise levying 17.5 per cent VAT on their spending. A rebate for as much as pound;2 million is also believed to be in the offing, writes Chris Bunting.

Last year's TES revelation that action zones would be charged VAT was a shock to those involved in the pound;20m-a-year flagship project.

Zones which had assumed they, like schools and local authorities, would be exempted from VAT, suddenly found themselves facing bills of more than pound;50,000 for half a year's spending.

Now, they believe a resolution of their problems is close. Mark Pattison, chair of the local authorities' EAZ network and director of education at Blackburn and Darwen, which contains a zone, said: "The understanding is that a commitment has been given that this will be sorted. There has also been an oral assurance that it will be retrospective."

Wendy Webster, zone director for Barnsley, said her project was budgeting on the basis that no tax would be charged.

"The officials have said that the situation is being looked at and they are confident that things have been resolved in relation to VAT not taking any of the resources of the zone," she said.

A zone director in the north of England, who did not wish to be named, confirmed there had been an oral commitment. "There was a period where we were not getting definite answers to the complaints (about VAT), but now the officials are saying that they are going to find a way round it one way or the other," he said.

But, while zones are planning their budgets on the basis of the assurances, the Department for Education and Employment is keeping them in suspense.

A DFEE spokesman said: "There is no change in the situation. We are still in negotiations about this."

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