4. BUILDING AND REPAIR PROJECTS
The following notes are complementary to guidance issued by the DfES. The Diocesan Finance Office is always willing to help governors in their administration of building projects.
4.1 Insurance on Capital Projects and Repairs
The Diocesan insurance provides cover for extensions, alterations, or repairs to existing buildings where the contract price is less than £10,000. For contracts in excess of £10,000 extra insurance is required with an additional premium. The requisite insurance form "Application for Building Works Insurance" is obtainable from the Diocesan Finance Office. Contractors provide insurance cover for the construction of new freestanding buildings. The Diocese expects the professional adviser to inform the Governors of the need for this insurance. It is important that this insurance is taken out before commencement of work on site. Completed forms must be returned to CCIA with cheques payable to CCIA.
4.2 Payments to Professional Advisers and Grant Claims
Professional advisers will not receive any payments until the DfES has issued the appropriate letter(s) setting out the levels of professional fees eligible for grant claims. Grant claims should be made promptly in order to obtain grant before paying the professionals. Invoices do not need to be receipted for a grant claim.
4.3 Certificates and Payments to Contractors and Grant Claims
The contract documentation for all capital and repair projects must be amended to stipulate that the employer should pay the contractor within 28 days of the date of issue of each interim certificate. This will also apply to payment of the final certificate. This modification must be made to the contract documentation prior to inviting tenders. It applies to all contracts, of whatever size, and whether or not under JCT conditions. The architect/quantity surveyor will ensure that certificates and contractors' invoices include the appropriate VAT payable. Grant claims should be made promptly to obtain grant within the 28 day period. Certificates/invoices do not need to be receipted for grant claims.
The final grant claim however does require the submission of receipted invoices from both professionals and contractors.
4.4 VAT on Construction Works
The following construction work may be zero rated for VAT:
- new freestanding buildings
- alterations to listed buildings
- disabled person access and toilet provision
- hearing loop systems
Note that annexes in schools are no longer eligible for zero rating from June 2007. HMRC have changed their interpretation to exclude annexes where the use similar to that in the existing buildings. This will probably encourage schools to have VAT “gaps” between new and existing buildings.
The construction work for freestanding buildings can be apportioned between standard and zero rated for VAT. The building professional must contact the Diocesan Finance Office for the appropriate HMRC certificate for the contractor.
New buildings zero rated for VAT for building work may only be used for limited “business” use for ten years. Business use is any income generating activity such as, lettings, after school clubs, breakfast clubs, etc; profitability is not considered. Nursery schools may be deemed non-business in certain circumstances. Donations are not business income. Non compliance could trigger a demand from HMRC for payment of the full VAT.
The following construction work is always standard rated for VAT:
- repairs
- alterations to unlisted buildings
- extensions
- fees of building professionals
- loose contents, carpets, curtains, landscaping
Attempting to avoid VAT by paying contractors cash is a criminal offence.
4.5 Project Completion - Insurance
Upon reaching practical completion, the governors take over responsibility for insuring the new works. The Diocese as owner of the property should be informed. This is particularly important for "non-VA school" buildings, such as, nursery schools, chapels, "mothballed" classrooms. These are insured at full reinstatement cost without DfES grant aid.
4.6 Project Administration By Diocese
The Diocesan Finance Office may administer schools projects over £50,000 in value on behalf of the school governors. The procedures adopted for this assistance are:
- The DfES must have issued their full approval letter detailing the terms and conditions, and a copy is sent to the Finance Office, before any work commences on site. Similarly, the relevant DfES letters must have been issued before any design fees are rendered for payment.
- If any part of a project includes a freestanding building the appropriate certificate for zero rated VAT is completed by the Finance Office. Your design professional should approach us for this before construction starts.
- The Governors pay the FULL Governors' liability to the Finance Office before the project commences.
- The Governors authorise the Diocesan Finance Office to sign VA/Claim forms on their behalf to claim DfES grant.
- The design professionals must amend the building contract so that the payment period for interim and final certificates to the contractors is 28 days.
- The design professionals must ensure that the necessary insurance provisions have been put in place.
- The design professionals will put the building contract in the name of the governors, but all invoices and certificates must be sent direct to the Finance Office, with copies to the Governors.
In the event of an overspend on a project, the Diocese will claim grant on invoices up to the DfES limit, and then pass all further invoices to the Governors for payment.
