Compensation for VAT on secondments in inclusive education: too blunt an answer

The messaging gives the impression that secondments by schools to partnerships are now subject to 21% VAT. In our view that is wrong.

The 2022 Spring Memorandum states that partnerships for inclusive education will be compensated for the VAT burden on staff seconded by schools to those partnerships, and vice versa. The reason given is that these secondments were previously exempt but that this is no longer possible because EU rules have been tightened. Recent communications from the national support centre and the secondary education council give a different reason.

The reason for the compensation

According to the ministries of Finance and Education, the exemption is no longer available because of the December 2018 decree on seconding staff. That is not EU law but national policy.

The decree provides that secondment in the social sector is only exempt where not only the hirer but also the lender applies the exemption for social activities. That condition is not met for secondments in inclusive education: partnerships apply the exemption for social activities, while schools apply the one for education.

Too blunt an answer

What strikes us is the claim in those communications that applying a different exemption means secondments by schools to partnerships are subject to 21% VAT. In our view that is wrong.

Under the VAT legislation and the case law interpreting it, seconding staff from a school to a partnership could and still can be an exempt service closely linked to education. It is not necessary for the hirer to apply the education exemption.

Secondment by partnerships to schools in order to carry out the support plan is, in our view, subject to 21% VAT.

What to do

Schools facing VAT on secondments to partnerships therefore need not simply accept it. Those secondments can still be exempt under the legislation. We are happy to map out the options and how you can protect your position in good time.