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probably a daft question but,

Discussion in 'Primary' started by zannar, Aug 25, 2011.

  1. zannar

    zannar New commenter

    if academies are to be run as a business(my understanding is they are not allowed to be in deficit) are they liable for paying tax on their income?
    I have to admit I haven't read all the ins and outs of academies but this question just popped into my head, no idea why!
     
  2. zannar

    zannar New commenter

    if academies are to be run as a business(my understanding is they are not allowed to be in deficit) are they liable for paying tax on their income?
    I have to admit I haven't read all the ins and outs of academies but this question just popped into my head, no idea why!
     
  3. Schools in general are not allowed to run deficits. Businesses can run deficits if they can afford them out of borrowing or retained profits. Schools are not allowed to borrow without permission of the education secretary. These rules apply to academies as well as non academies. Also schools carrying significant surpluses from one year to the next (ie retained profits) is regarded as very poor (money should be spent on the cohorts that it is given for).

    Companies dont pay taxes on their income; they pay taxes on their profits. Academies are chaitable companies - all their profits are donated to the schools they run and so there is now liability for corporation tax.
     
  4. zannar

    zannar New commenter

    Thank you.
     
  5. So why would private companies wish to run schools - there has to be something in it for them.
    http://www.guardian.co.uk/education/2010/may/25/free-schools-private-companies
    http://www.telegraph.co.uk/education/educationnews/7969540/Allow-private-firms-to-run-schools-says-Ofsted-chief.html

     
  6. Why do companies make any charitable donation? Tax breaks, good publicity, altruism. Also there is a potential work around the no profits issue - the charitable academy can by services from the owning profit making company!
     
  7. This is indeed the case. One local school that I know of had a rather large global ICT hardware firm as one of their sponsers and it was interesting how every piece of ICT equipment in the school had their name on. Plus of course the ongoing service agreement. Nice way of getting business!
     

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