The Implementation of IFRS16 changes leasing for schools.
In April the DFE changed the guidance for leasing for LEA-maintained schools and Academies.
The changes have an immediate effect on LEA-maintained schools but Academies implementation may not apply until September 2024.
Up until April, schools had been limited to Operating Leases when signing lease contracts, but since April LEA- Maintained schools have been able to sign up on Finance Leases.
What does this all mean – Finance Leases vs Operating Leases?
In short, LEA Schools can now have finance leases, for the assets listed below, without having to get permission from the Secretary of State
A Finance Lease is what is called a “full pay-out” lease, in that you borrow 100% of the invoice cost over the primary term.
For information on Operating Leases please visit our Education pages.
At the end of a Finance Lease title of the assets can be passed to a 3rd party e.g. PTA, or Board of Governors for a one-off fee, rather than having a secondary rental period as with an Operating Lease.
You will still be able to have Operating Leases but Finance Leases tend to be more flexible, especially with regards to the assets that can be financed. There will continue to be situations where a school may still wish to elect for an Operating lease; especially for assets with a shorter ‘shelf life’, such as tablets for example.
Note the asset classes listed are:
- IT equipment – Including Interactive Touchscreens
- Telephony
- Catering equipment & Cleaning equipment
- Furniture
- Bathroom & Sanitary equipment
- Gym equipment
- Grounds keeping equipment
- Minibuses and other vehicles for the use of the school
- Temporary classrooms and equivalent structures
Link to DFE changes:
https://www.gov.uk/government/publications/leasing-for-maintained-schools/changes-to-leasing-agreements-for-maintained-schools
If you would like to chat about this in more detail and with a real human just use the contact form below, or give us a ring on 01269 844442, or email us at enq@axisleasing.com and we will come back to promptly.
