Wokingham Borough Council encourages pupils at Local Authority - LA - schools to take advantage of the Assisted Instrument Purchase Scheme, which supports young musicians by allowing them to purchase instruments VAT free, and is approved by HM Revenue and Customs. This guidance was last updated in March 2007.
Eligibility
To comply with HM Revenue & Customs rules, the following criteria must be satisfied:
-
The goods and services must be closely related to the education provided. This means that it must be for the direct use of the student and necessary for delivering the education to him or her.
-
The pupil must receive education from the LA [or school] - in either an LA maintained school or in connection with some other LA run educational activity, such as an orchestra. [such as Berkshire Maestros, formerly the Berkshire Young Musicians Trust.]
-
The goods or services required must be purchased from the LA [or school]. This means that the LA [or school] must hold title to the goods and transfer ownership to the parent, guardian or pupil purchasing them. However, within that, the delivery address and point of distribution of those goods is a matter for individual LAs [or schools] to determine.
-
Payment for the goods must be made either to the LA or to the school. If paid to the school it must be paid into the school’s official funds.
-
Some evidence, e.g. order form, must be kept to show that the recipient of the goods and services has been receiving education from the LA [or school], and that what was supplied was essential to that education. The style of the order form can be tailored to the needs of the LA.
-
The price of the goods and services supplied must be at or below cost; this is to ensure there is no intention to make a profit. “Cost” means the full overhead-inclusive price of supplying the goods or services to the pupil and includes, for example, the costs associated in administering the AIPS scheme.
-
In certain cases goods may be leased. In such cases the same rules as will apply as for sales.
Note: Text [in square brackets] is an interpretation of the guidance.
Using the scheme – step by step
It is suggested that the parent downloads and uses the agreement form attached below which collects together the main information required to use the scheme as intended.
-
The pupil/parent selects the instrument required - probably identifying the supplier that they would expect to use and indicating that they expect the purchase to be by the school under the terms of the Assisted Instrument Purchase Scheme. These details can be entered on the agreement form.
-
The parents ask the school whether they are prepared to participate in the scheme and for details of any administrative charge the school intends to make.
-
The parents should sign an agreement with the school before the instrument is ordered which includes a description of the instrument and its cost - therefore binding the parents to buy the instrument, details of delivery/collection arrangements, and a description of the rules of purchase. The agreement form contains the main details that relate to the scheme.
-
The parents pay the school the EX-VAT amount plus any amount the school is adding as an administration charge.
-
The school places an order for the required instrument with the retailer identified by the pupil/parent.
-
The instrument is supplied together with a VAT-included invoice to the school.
-
The parent/pupil collects their instrument.
-
The school pays the invoice and reclaims the VAT element in the usual way.
-
Once the process is complete, a completed copy of the agreement form should be sent to the Music Adviser at Wokingham Borough Council Offices so that use of the scheme can be monitored.
Wokingham Borough Council encourages the school to keep a record of the name and age of the pupil, and the type of instrument purchased, and forward this information to the music adviser at Shute End to enable use of the scheme to be tracked. The agreement form can be used for this purpose.
Further Points
-
Schools may wish to set a minimum value for instruments purchased through the scheme, as they may feel that the saving made on purchasing a cheap instrument does not warrant the administration involved.
-
Schools may wish to make an administration charge to cover the costs of administering the scheme. In practice, some schools make such a charge, but others see the purchase as of wider benefit to the school - eg. in anticipation that the pupil will use the instrument in school concerts etc, and elect not to make a charge. This is at the discretion of individual schools.
-
As the school is selling the instrument to the parents, the school will be responsible for ensuring that the instrument ordered is fit for purpose, of suitable quality and with no defects when it arrives at the school. The supplier will have similar responsibilities to the school.
-
As the school is the initial purchaser it will have the benefit of any warranty/ guarantee. Therefore the school will usually need to assign the benefit of this to the parents, so it will be necessary to check that the guarantee can be assigned with the supplier.
Further information on the VAT arrangement
Education provided by local authorities is treated as a non-business activity and as such falls outside the scope of value added tax.
For more information about this scheme, please contact David Congdon, Music Adviser.
