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HMRC internal manual

VAT Education Manual

Local authority (LA) schools: voluntary aided schools

The background to the recovery of VAT by local authorities is explained in VATGPB. With effect from 1 September 2009, Section 33 of the VAT Act 1994 only has application to the goods and services that they purchase, not on the goods and services that another legal entity purchases.

Therefore, with effect from 1 September 2009, with respect to projects initiated after this date, VAT may no longer be recovered by local authorities in these circumstances, as the supplies are not made to them (whether or not paid for from the delegated budget). We will consider, on their individual facts, cases where a project initiated after 1 September 2009 was funded on the basis of previous policy.

A local authority may, however, continue to recover VAT on expenditure at a voluntary aided school for which the local authority is statutorily responsible, or where the local authority, rather than the governing body, procures a supply of works and pays for that supply from its own funds (for further details please refer to VAT Notice 749: Local authorities and similar bodies. In such cases HMRC accept that the local authority receives the supply in connection with its non business activities.