In the past, new academy buildings have been zero rated due to academies’ status as charities. However, this zero rating placed restrictions on the “business use” of the buildings i.e. the community use of the buildings for which a charge is made. The Chancellor’s budget announcement statement concerning the removal of VAT constraints for current academies and those planned for the future enables the scope of these buildings’ use to be extended and future buildings can now be designed with community use in mind.
These changes will further strengthen the effectiveness and value for money of the academies programme as it continues to move forward.
The Department will continue an open dialogue with colleagues at HM Treasury about VAT policy and other matters. However, we must be mindful that European Union VAT agreements, signed by successive Governments, mean that while the UK can retain existing zero rates, such as that for charitable buildings, it cannot extend these or introduce any new VAT reliefs.