The Department for Education has been left with a £10.3 million hole in its budget over a failure to secure VAT refunds for new free school sites.
New departmental accounts for 2021-22 reveal the millions in losses are a result of potential VAT refunds going unclaimed before HMRC’s deadline.
Trusts are able to reclaim the tax on non-business purchases from HMRC. The DfE said it bought several sites for free schools and paid the VAT itself, on the basis trusts would later claim and repay the department once schools opened.
But it has now formally recognised this will not happen in this year’s accounts, saying “several trusts have not reclaimed this acquisition VAT and therefore cannot repay the department”.
The claims for nine trusts’ free school sites are “no longer eligible as they are over the four-year limit set by HMRC”.
The trusts include some of England’s largest, Star Academies and the Harris Federation, with £4.1 million written off over the former and £1.4 million over the latter.
