Schools may face ban on VAT claims

CUSTOMS officials are considering whether to ban schools and colleges from reclaiming VAT on musical instruments and computer goods, writes Russell Hotten.

The move follows complaints from high street traders that many of the products are bought by schools free of VAT and then sold on to pupils at a discount.

The fear is that schools are turning the VAT concession into a business enterprise, undercutting shop prices.

Critics say the supply of musical equipment is where the concession is most abused. Arthur Spencer-Bolland, of the Music Retailers' Association, said: 'Everyone now knows they can purchase a professional musical instrument through the local authority without paying VAT.' He claimed to know of a case where a rich piano student bought a Steinway at a substantial discount through a college.

The Department of Education could not say how much schools and colleges reclaim in VAT, but it runs into millions of pounds.

Customs & Excise said inspectors were compiling a review covering all items on which VAT is reclaimed, including art, sports and electrical equipment. But a spokesman stressed it could be several months before any conclusions are reached.