Purchase V.A.T. Free (A.I.P.S.)
This scheme, brought in by the government over thirty years ago, enables pupils, or their parents, to be able to purchase a new instrument without paying the V.A.T. at 20%.
The system works in the same way as if a pupil wished to purchase a calculator, laptop or any other goods that are closely related to education through their school.
Advantages of the Scheme:
Encourages musical life within the school education system and enables pupils to play on brand new instruments they could not otherwise afford.
How the scheme works:
1. Parents contacts Alan Gregory Music & Musical Instruments and selects an instrument
2. Parents ask School if happy to accept the A.I.P.S. and a purchase order is raised
3. The parents pay the school for the instrument minus V.A.T.
4. The instrument is delivered to the school with an invoice for the amount including V.A.T.
5. The instrument is released by the school to the pupil
6. The school claims the V.A.T. back at the end of its normal accounting period
Rules and Regulations:
1. The pupil must receive music lessons within school or local authority
2. The instrument must be portable
3. The instrument must be used at school or the at local authority least once a week
If you are interested in more information on or for confirmation of the A.I.P.S. scheme please see the following links on the H.M.R.C. website or feel free to call the sales team on 0161 445 4466.
Local Authority Education Services: Assisted Instrument Purchase Scheme - VATGPB7825
Services Sold to Pupils: Assisted Instrument Purchase Scheme - VATEDU53000
Academies or Free Schools are also eligible under Section 33B of the V.A.T. Act 1994 - VATEDU70000
Full guidelines are also published through CIPFA, covering sales by Local Education Authorities (L.E.A.'s).
The A.I.P.S. can be combined with the Guaranteed Buy Back Scheme where parents can purchase instruments at the Educational Discounted Price, so should they wish to return the instrument they may do so within 6 months with a guaranteed return of up to 90% of the purchase price. In conjunction with the Assisted Instrument Purchase Scheme, parents and pupils can afford better quality instruments, which would further enrich the musical life of the school.
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.