Extended schools and children’s centres hit by VAT

Funding shortages have hit local authority run extended schools
and children’s centres because they are not automatically
exempt from VAT, a conference heard, writes Amy
Taylor.

Speaking at a conference on childcare and regeneration,
Julia Gault, assistant director of the Sure Start Unit, said early
years, chilcare and extended schools were not automatically exempt
from VAT, unlike statutory services, because there was no legal
requirement to provide these services and therefore different rules
applied.

She said she knew of “various local authorities” that
were having difficulties. These happen when councils exceed the
limit on the amount of VAT that is allowed to be disregarded for
them by tax officials.

A delegate from Gloucester Council said that the local authority
had worked out that the problem could cost them over £1m. She
said she had sent a letter to children’s minister Margaret
Hodge six months ago outlining the issue but was yet to hear
back.

Gault said that the Sure Start Unit was lobbying the Chancellor and
that she hoped some measures to ease the situation would be
contained in this summer’s Spending Review. However, she
added that part of the problem was due to EEC VAT rules.