FIA schemes and VAT update

To reassure you, to the best of our knowledge, there have been no changes to the relevant guidance that would affect the FIA schemes we have previously advised on.

As anticipated, HMRC has started to make enquiries of schools in relation to the VAT policy. It seems that this may be due to the amount of VAT collected being lower than policymakers had expected. Some schools have reported receiving questions from HMRC, not only about their FIA schemes but also about VAT in general, including how they’ve approached VAT-related decisions across their services. As we mentioned before, it’s still unclear how HMRC may choose to challenge an FIA scheme, or how they might scrutinise a school’s VAT treatment of its services under this relatively new legislation.

At present, we’re not aware of any test cases that have provided clear conclusions on the application of VAT to school services or FIA schemes. It is likely, however, that at some point, a test case will be published. When this happens, whether it involves your school or another, it may be a good opportunity to reflect on the decisions and actions your school has taken, particularly in the lead-up to the last general election and during the latter half of last year.

In the meantime, there are some practical steps you may wish to consider:

• Ensure VAT remains a priority on your risk register and that decisions about VAT are being made at the appropriate level within your school.
• Consider whether it would be helpful to communicate with parents to remind them of their involvement in the FIA scheme and the terms they agreed to. Whether you decide to do this, will be a matter for each school as it will be important to weigh up whether this could potentially cause unnecessary concern.
• If you receive any queries from HMRC, we recommend responding carefully and consider seeking further professional advice before replying.

If you have any concerns or require further advice, please contact Susie Luckman in our Corporate team.