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HMRC internal manual

VAT Education Manual

HM Revenue & Customs
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Local authority (LA) schools: New Opportunities Fund, lottery funding, etc

A voluntary aided school or foundation school may obtain funding for a particular project from the New Opportunities Fund, the National Lottery, Sport England and similar sources. The local authority can recover VAT only if these funds are paid into the school’s delegated budget or other local authority accounts.

Regardless of who actually applies for the funding, if the money is paid into the school’s unofficial funds and at no stage actually belongs to the local authority, the latter will not be able to recover the VAT.