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Islington Tribune - by MARK BLUNDEN
Published: 3 August 2007

Academy hit with £4m VAT bill for canteen

Islington Green faces shock tax charges

BOSSES of a new city academy are scratching their heads over how to sidestep an unexpected £4 million VAT bill.
It emerged this week that the academy planned for Islington Green School will have to pay more if special needs children eat their lunch in the main canteen with other pupils.
Islington Green, in Prebend Street, Angel, is set to become a £26 million ‘super school’ in September 2008, with the City of London and City University as its sponsors.
The secondary department of the Richard Cloudesley special school, presently at Golden Lane, Finsbury, will be moved to the 10,000-square metre site.
But a contractual loophole means the Cloudesley school is not counted as part of Islington Green.
Therefore some services, such as the canteen, will all incur VAT.
Sponsors’ fears about the VAT charges were revealed in the minutes of the steering group meeting last month.
It states: “Supply of services to RC students (eg teaching/dining) could incur VAT and count as part of a 10 per cent community use allowance.
“Academy will not charge for teaching provision but needs to find a way around classifying dining as business use.”
The academy now faces a £4m VAT bill for the Cloudesely children if an agreement cannot be reached with the customs inspectors.
Ken Muller, spokesman for Islington’s National Union of Teachers, said: “The sentence where they talk about having to ‘find a way around’ sounds like tax avoidance to me.”
The City of London has assured Richard Cloudesley parents they will not have to pay any more for school dinners.
A spokeswoman said: “School dinners will cost (parents) the same whether pupils eat at Richard Cloudesley or the academy.
“They can choose where they eat their lunch.”
Even more VAT could be payable if the academy site is rented to community groups.
There is also evidence that academy bosses feel the project has got an image problem.
The committee minutes note the importance of launching a “hearts and minds” offensive to win over parents, staff and residents.
Steering group representatives also recognise, as predicted in the Tribune last month, that the planned opening date of January 2008 is “no longer achievable”.
The minutes state: “Potential risk of extra year to the project but not possible to quantify until options are worked through by design team.”

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