Community, foundation and voluntary controlled schools should not incur VAT costs on school buildings that are also made available for community use. Local authorities usually reclaim from HMRC all VAT relating to the construction of these buildings, even when the premises are also offered for use by the local community outside school hours. In relation to voluntary aided schools, government grants for new school buildings should be provided on a VAT inclusive basis where VAT will be chargeable on the construction.
VAT is not chargeable on the construction of non-local authority schools operated by charities, such as academies, provided that charged and other non-charitable use of the building does not account for 10 per cent. or more of total use. An academy can therefore offer unlimited non-charged use of its facilities without incurring any VAT costs and, under the 10 per cent. allowance mentioned above, a 1,000 student academy can provide charged use of its facilities for around 50 people per day on average without incurring any VAT costs on construction.
The Government recognize that VAT rules can constrain the extent to which academies can offer facilities on a charged basis to the local community without incurring a VAT charge on construction costs. HM Treasury is working closely with DfES and HMRC on a principled solution.