VA schools are maintained schools that are eligible for capital funding by grant from the Department for Education (DfE). The LCVAP programme is the main capital funding stream accessible to VA schools. However, the governing body must usually pay at least 10% of the costs of capital work funded from LCVAP. At present, local authorities (LA’s) in conjunction with the Archdiocese of Birmingham co-ordinates the LCVAP programme for Catholic schools in its area.
Responsibility for work to VA school estate is shared between the school’s governing body and the LA. The LA is responsible for the playing fields and any building located upon them and the governing body is liable for all other capital expenditure.
VA schools also receive a formulaic capital allocation known as Devolved Formula Capital (DFC) from the DfE. DFC funding can be used for improvements to buildings and other school facilities, including ICT, or capital repairs/refurbishment and minor works. It is for governing bodies and headteachers to determine how this funding is spent, based on their building need and priorities. There is a minimum spend value of £2,000 for an item to be classed as capital spend. For example, a repair to a roof costing £500 would not be classed as a capital item, this is classed as revenue spend.
VAT and capital spend for a VA school There are fundamental differences between VA and community maintained schools. The School Standards & Framework Act states that the governing bodies of maintained schools incur all of their expenditure as an agent of the Education Authority; this allows the Education Authority (the Council) to recover VAT that the governing body has incurred on its behalf. In the case of a VA school, the Council does not own the buildings and the governing body has responsibility for capital expenditure in relation to them and their playgrounds. Thus, where a VA school incurs Capital expenditure the supply is actually direct to the governing body rather than the Council. This leads to different treatments for VAT, as VAT is only recoverable by the body which properly received the supply/goods that the VAT was incurred on. In the case of Council expenditure the LA is able to recover VAT it incurs from HMRC as LA’s are VAT registered. Governing bodies are generally however not registered for VAT and are unable to recover the VAT they are charged. Even if the governing body is registered for VAT, schools provide education as a statutory requirement and this is classed as a non-business activity. As the schools are mainly involved in a non-business activity, even if VAT registered in their own right, they are unable to recover VAT relating to this activity (i.e. VAT on capital works). As you are aware when a VA School incurs capital expenditure a proportion of that cost may be met by DFC from the Department for Education. This funding is typically calculated to cover irrecoverable VAT charges, the remainder is funded by ‘governors contributions’ (presently 10%). To summarise, the governing body of a VA school must pay 10% of the total cost of capital works which uses DFC as its source of funding; VAT must also be paid and is not recoverable by the governing body.
LCVAP Funding update The DFE wrote to all VA schools in October 2018 informing of changes to the LCVAP capital funding programme from March 2020 onwards. From this date, LA’s will no longer co-ordinate the programme in their area, instead the Diocese will be the responsible body for allocating capital to its VA schools. Governing bodies will still be required to contribute 10% towards the cost of a project. As the diocese will be deemed the responsible body, we will be introducing a 1% levy on LCVAP funded projects as a contribution towards the programme administration costs.