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VAT: ASSISTED
INSTRUMENT PURCHASE SCHEME (AIPS)
I would like
to turn first to the question of why the scheme applies only to LEA-maintained
schools. Local authorities are refunded any VAT they incur in delivering
their non-business statutory activities, including the provision of
education. The object of this is to prevent VAT falling as a burden
on local taxation.
Independent
schools are not publicly funded bodies and, therefore, when such schools
provide musical instruments to their pupils as part of a music course,
they must either bear the VAT costs themselves, or pass it on to students
in the price they charge for instruments. Nonetheless music courses
provided by independent schools are free from VAT.
With regard
to AIPS, many local authorities have introduced voluntary schemes under
which they are prepared to subsidise the cost of musical instruments
- AIPS being the umbrella term for such schemes. AIPS enables qualifying
students to purchase musical instruments through their LEA music service
or school (often at reduced prices and net of VAT) for use as part of
the normal school curriculum.
The operation
of AIPS varies according to the policies of the LEA involved, but the
following basic conditions will apply in most cases.
- the LEA or
school must place the order for the instrument and accept the delivery;
- the LEA or
school must be invoiced - enabling them to recover the VAT;
- the transaction
between the student and the LEA or school must take place on LEA or
school premises in a room that is normally used for teaching;
- the instrument
must be appropriate to the student's needs and ability;
- the instrument
must be portable and taken to LEA premises or school on a regular
or weekly basis for use during lessons (from either the school or
the local authority's education department); and
- the LEA or
school must sell the instrument to the student at or below cost.
Where local
authority schools meet these criteria and are therefore able to obtain
a VAT benefit, they may choose to reflect this benefit in the price
they charge on to students for what are essentially items to be used
in class. However, this is entirely up to the local authority concerned.
When a student
receives regular tuition from the LEA's music service there is usually
no requirement for him or her to be a student of one of the local authority's
schools. If their local authority operates such a policy, this may enable
students of independent schools to take advantage of musical instrument
purchase under AIPS.
To summarise.
It has always been a feature of the VAT system that local authorities
can recover the VAT they incur on their non-business activities, including
the provision of education. This explains why schools that are not publicly
funded cannot be part of AIPS. However, although open only to LEAs and
LEA-maintained schools, AIPS itself is a purely voluntary scheme which
different local authorities are free to operate in different ways.
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