VAT ruling offers boon to 800 schools

15th August 2003 at 01:00
London school sets precedent by reclaiming tax on building work, reports Emily Clark.

A LANDMARK tax victory this week could save foundation schools an estimated pound;125 million a year.

Northolt high school in west London set a precedent when Education Secretary Charles Clarke gave consent for the school to reclaim pound;225,000 value added tax on building work worth more than pound;1m.

The move could prompt claims from the 863 foundation schools in England which have lost out on an estimated pound;500m since they were established four years ago. However, VAT cannot be recovered retrospectively. Other schools do not pay VAT on building work.

Yash Joshi, VAT accountant for Ealing council, was given special permission by the Government to put proceeds from the sale of school land into the hands of the local education authority, which then reclaimed VAT on its behalf, thus saving the equivalent of seven teachers' salaries or the cost of a new sports hall and changing rooms.

About three in 10 schools are engaged in building work every year, costing them an average of pound;500,000 each in VAT.

Leonora Thomson, education spokesman for Ealing Council, said: "We are talking about pound;125m per year being lost to schools. It is vital that in these times of cutbacks schools receive every penny to which they are entitled."

Mr Joshi needed special consent to transfer income from the sale of the former grant-maintained school's land to the council.

A second school in Ealing, Dormers Wells infants - also formerly grant-maintained - is now recovering the equivalent of a teacher's salary.

The council has distributed an explanatory manual to its seven other foundation schools.

George Phipson, general secretary of the Foundation and Aided Schools National Association, welcomed the victory. He said: "We have had to pay VAT where other schools did not and this levels the playing field."

A spokesman for the Department for Education and Skills said: "We were happy to assist the school with a proposal that enabled the LEA to apply to Customs and Excise to reclaim VAT. This was on the basis that the funds will be re-invested in the school."

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