VATGPB7570 - Local authority education services: voluntary aided schools: Annex A - Flowchart to determine VAT recovery on revenue and Capital Expenditure
Source: gov.uk (2025-12-05)


VATGPB7530 (https://www.gov.uk/hmrc-internal-manuals/vat-government-and-public-bodies/vatgpb7530)The following process, expenditure in respect of school premises, should assist in determining whether VAT can be recovered on expenditure incurred by voluntary aided (VA) schools, or incurred by local authorities on behalf of a VA school.

Expenditure in respect of school premises

‘Premises’ excludes: playing fields, sports pitches and related buildings on such areas.

Step 1

Is work to the school premises being funded by capital grant, money raised specifically for capital projects or by Delegated School Budget?

Notes:
- Dedicated Schools Grant (DSG) - ringfenced Government Grant for the purposes of the Schools Budget
- The Schools Budget - delegated budgets allocated to individual schools + budget for pupils which local authorities fund centrally e.g. special educational needs, pupil referral units
- Delegated School Budget - The budget share of a school of which the Governing body has delegated powers
If Capital grant/ money raised for capital projects, go to step 2

If Delegated School Budget, go to step 3

Step 2

Who ‘owns’ the capital funding; whose objective is being met: Governing Body (GB) or Local Authority (LA)?

If GB, GB expenditure –whichever way the works are procured, the expenditure is for the GB’s benefit. VAT belongs to GB – ability to recover dependent upon GB’s own arrangements. (outcome)

If LA, LA expenditure. VAT belongs to LA – LA responsible for VAT recovery. (outcome)

Step 3

Is the value of the work under £2000?

If yes, the expenditure is LA revenue expenditure: VAT recovered via the LA (outcome)

If no, go to Step 4

Step 4

Does the school have a published policy that defines the expenditure as capital in nature?

If yes, go to step 5

If no, go to step 7

Step 5

Does the school’s published policy have a de minimis limit?

If yes, go to step 6

If no, VAT belongs to GB – ability to recover dependent upon GB’s own arrangements (outcome)

Step 6

Is the value of the work below the school’s published de minimis limit?

If yes, the expenditure is LA revenue expenditure: VAT recovered via the LA (outcome)

If no, expenditure classified as GB capital expenditure, VAT belongs to GB – ability to recover dependent upon GB’s own arrangements (outcome)

Step 7

Does the LA’s published policy define the expenditure as capital in nature? Note: all local authorities must have a published policy that defines capital expenditure as per the Local Authorities (Capital Finance and Accounting) (England) Regulations 2003.

If yes, go to step 8

If no, the expenditure is LA revenue expenditure: VAT recovered via the LA (outcome)

Step 8

Does the LA have a de minimis limit as part of their published accounting practice on capital expenditure?

If yes, go to step 9

If no, expenditure classified as GB capital expenditure (outcome)

Step 9

Is the value of the work below the LA’s published de minimis limit?

If yes, the expenditure is LA revenue expenditure: VAT recovered via the LA (outcome)

If no, expenditure classified as GB capital expenditure (outcome)