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HMRC internal manual

VAT Education Manual

Local authority (LA) schools: land sales by foundation schools

Where the governing bodies of foundation schools are allowed to keep the proceeds of land sales and use them to improve school facilities, the local authority can recover VAT on the costs of these facilities providing the proceeds are paid into the school’s delegated budget.

If the new facilities are put to any commercial use, the local authority will be liable for the VAT implications.

Where the sale proceeds are not paid into the delegated account, but rather are kept by the governors for their own purposes in their own accounts, the local authority cannot recover the VAT. This is because the governors will not be spending this money as agents of the local authority.