ESFA reveals church school exemption to related-party transactions rule

Church schools will not need to seek prior approval to buy services from their diocese, the Education and Skills Funding Agency has revealed.

From April 1, academy trusts will have to seek government leave to pay out more than £20,000 to any company or organisation with links to their management.

The rule change, announced last year in response to concerns over unchecked spending by trusts with linked firms, prompted concerns about the potential impact it would have on church schools.

Schools Week revealed earlier this month that government officials were still at loggerheads with academy bosses over a quirk that could hit hundreds of church schools, just weeks away from the date of the change.

Diocesan boards of education must be a member of any trust in their patch that has a Church of England school. It means that all trusts with CofE schools in the same diocese will be classed as related parties.

But today the government confirmed that services that can only be delivered by the diocese, which “provide essential functions fundamental to the religious character and ethos of the school”, are deemed as meeting the “at-cost” requirements, and will therefore not need prior approval.

Church trusts will still have to declare services bought from their dioceses though. The ESFA said that for transactions of over £20,000 with a linked diocese, a “single upload of evidence relating to the payment or levy for these services” is required.

Today’s guidance from the ESFA also reveals that the government is considering requiring all trusts to declare income from related parties.

Trusts will not need to declare income transactions with related parties, including donations to the academy trust from related parties, between April and September 2019 this year, but the ESFA “will review our approach for reporting these transactions before September 2019”.

The guidance also clarifies that prior approval will be needed both for single transactions valued at over £20,000, or any transaction which means transactions with the same firm add up to more than £20,000 over a financial year.

You can find the ESFA guidance on how to seek approval and declare RPTs here.

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