- The Capital Goods Scheme allows UK independent schools to recover VAT on significant capital expenditure used for taxable supplies.
- Historically, VAT recovery was low due to school fees being considered an exempt supply.
- With VAT now applied to fees, most school income is taxable, allowing for larger claims.
- Claims are expected to increase, impacting accounting for eligible transactions.
- VAT is recovered over a 10-year adjustment period, creating a VAT asset that unwinds annually.
- No direct impact on profit and loss as VAT asset recognition offsets fixed assets.
- Depreciation charges must be recalculated due to reduced asset values.
- Example: School A spent £1.2 million on a sports hall, with VAT recovery possible from 2025.
- School A can reclaim £100k over five years, with annual VAT recovery of £20k.
- Initial recognition involves adjusting VAT asset and fixed assets.
- Depreciation recalculated based on revised asset value.
Source: crowe.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
