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HMRC internal manual

VAT Government and Public Bodies

Local authority education services: voluntary aided schools: paragraph 7 of guidance on section 33 recovery agreed with the Department for Education

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Paragraphs 1 to 4 Section 33 VATGPB7530 Paragraph 5 Capital and revenue definitions VATGPB7540
Paragraph 6 VAT & expenditure VATGPB7550    

HMRC Guidance for Local Authorities and Voluntary Aided Schools - VAT recovery under section 33 VAT Act 1994 (continued)

7. Insurance arrangements for VA schools - VAT recovery in connection with Insurance claims

Whilst HMRC can advise on the VAT consequences of arrangements, they are unable to give any advice regarding who is responsible for insuring school premises and property. The Department for Education advise that, although they expect the school premises to be insured, the actual detail of what to insure is for the individual parties to determine. The school may therefore need to seek advice from the Department for Education or their local authority, especially in relation to funding for premiums and access to any local authority schemes, and from their Dioceses or other trustees (the ultimate owners of the buildings).

As regards VAT recovery on any capital costs that are being funded from an insurance claim, the normal rules as set out above will apply. As the responsibility for this capital expenditure rests with the Governing Body, any supply of building/repair works will therefore be a supply by the contractor to the GB and any VAT incurred thereon will not be recoverable if the works fall within this definition of capital.

Therefore, when establishing the level of insurance cover, the insurer should be made aware that any VAT incurred in respect of such works at VA schools is irrecoverable. The Department for Education have confirmed this view and recognise that this may result in increased premiums for VA schools.

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Annex A Flowchart to determine VAT recovery on revenue and capital expenditure VATGPB7570 Annex B Examples of when VAT is recoverable by local authorities  under section 33 VATGPB7580