Chapter CTM40895
| Published date | 16 April 2016 |
| Record Number | CTM40895 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
LEAs are the bodies responsible for the local administration of state sector education services in England, Wales and Scotland. Education and library boards are the equivalent bodies in Northern Ireland. Both are within the definition of local authority for tax purposes.
SchoolsWhen a local authority controls a school (or college or polytechnic) its income is covered by the local authorities’ exemption (see CTM80455).
Under the Schools Standards and Framework Act 1998 there are three categories of mainstream maintained school:
- community,
- foundation,
- voluntary (divided into aided and controlled).
Recent years have also seen the introduction of academy schools and free schools
Community and foundation schools replaced the previous categories of county, special agreement and grant maintained. Schools in all three categories have much in common and all work closely with the LEA and receive most of their funding from the LEA. However, only community schools are controlled by the local authority and therefore covered by the authority’s own exemption.
Foundation, voluntary, academy and free schools are outside the control of local authorities and are not therefore covered by the exemption. Such schools are, however, charities within the meaning of FA10/SCH6/PARA1 (and briefly before that CTA10/S467) and will be entitled to the exemptions in CTA10/PART11/CHAPTER3. Any claim for charitable exemption or evidence that a taxable source of income or a chargeable gain has arisen should be submitted to HMRC Charities with a copy of the latest accounts (if available). Do not ask for a copy of the instrument creating the body.
School fundsThe Education Reform Act 1988 set up the local management of schools scheme for schools which continue to be controlled by LEAs. This gives school-governing bodies a limited degree of financial independence and discretion through what amounts to a form of delegated budgeting. Individual schools may open bank accounts under these arrangements and receive interest. HMRC takes the view that the funds in local management of schools bank accounts remain in the beneficial ownership of LEAs and any interest received is therefore exempt under their exemption. Accordingly interest should be credited to these bank accounts without IT being deducted (CTM40880).
Many schools will also hold accounts with other items, reflecting for example funds collected for a...
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