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Navigating financial changes for colleges: VAT challenges and expert solutions

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My colleague Gillian McGill and I recently recorded an episode of the Larking Gowen Insights podcast where we explored the evolving landscape of the college sector, focusing on recent regulatory developments and their financial implications.

The reclassification of further education colleges into the central government sector has brought about significant changes, particularly in financial controls and governance. Colleges now face new requirements, akin to those imposed on Academy Trusts, meaning they have lost financial freedoms, particularly in borrowing and refinancing.

The shift towards Department for Education authorisation for loans and refinancing poses challenges for colleges accustomed to funding through borrowing. With accounts signoff delayed in some cases and uncertainty surrounding permissions, colleges encounter difficulties in managing major projects and routine operation.

Moreover, the inequitable VAT treatment in further education (FE) increases financial pressures on colleges. While academies enjoy favourable VAT recovery, colleges are left at a disadvantage, with VAT making costs significantly higher and reducing funding per student.

Despite campaigns urging VAT reform, including the recent efforts by the Association of Colleges, no substantive changes have been implemented. Political will and potential legislative shifts may hold the key to addressing these disparities in VAT treatment.

We discussed the Colchester Institute case which underscores the complexity of VAT regulations for colleges. The ongoing ambiguity surrounding VAT rules necessitates professional advice and proactive management to navigate the intricacies effectively.

At Larking Gowen, we offer tailored solutions and expertise to support colleges in managing their financial obligations. From optimising VAT recovery to providing training and guidance on tax matters, our team is committed to assisting colleges in overcoming challenges and maximising financial efficiency.

In conclusion, while the financial landscape for FE colleges has major challenges, expert guidance and proactive management can help navigate complexities and make sure there is financial sustainability in the ever-evolving education sector.

If you have any questions about this topic, please get in touch with your usual contact at Larking Gowen, call 0330 024 0888 or email

You can listen to our podcast episode for a more detailed summary here.

Giles Kerkham


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Larking Gowen


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