Many academies offer pre-school, nursery or crèche provision from their setting. The pre-school may help to provide an easier introduction to the school for local children in catchment, but it may also be provided to assist members of staff with young children.

The costs of the pre-school are usually paid for by parents, but are also be wholly or partly grant-funded. This is particularly the case with children over the age of three who can benefit from 15 hours per week of state funding. Some two-year-olds also qualify for this funding depending upon their parents' circumstances.

Although not entirely clear from the HMRC guidance, it appears that the state funded element should be considered a non-business activity, while the paid element will be a business activity. The income and expenditure can be allocated to business and non-business in proportion to the funding rather than being treated as wholly business or non-business, even if one part forms the greater percentage of the overall provision.

VAT Treatment


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