Key changes to leasing arrangements for Academy Trusts

Kevin Connor, Head of Academies at Bishop Fleming, considers the much-anticipated relaxation around leasing arrangements set to have a key impact on Academy Trusts.

The Department for Education published guidance on 28 March 2024, which is set to provide far greater flexibility for the Academy Sector by enabling Trusts to enter into finance leases in certain circumstances without requiring prior consent from the Secretary of State for Education. The change comes into effect from 1 September 2024.

Historically, Academy Trusts are required to seek prior consent for any borrowing.  However, the latest guidance now provides a set list of finance lease arrangements that are considered pre-approved and will no longer require Trusts to incur the additional administrative burden of obtaining consent. There are plenty of examples of this being a barrier to a Trusts’ ability to enter into arrangements that would otherwise appear to make commercial sense.

The process of identifying whether a lease is “operating” or “finance” in nature for accounting purposes has been a key part of Trust procurement processes, as the latter is a form of borrowing. The accounting determination will remain important for financial reporting purposes.

In accordance with the Academy Trust Handbook, Trusts must also ensure value for money is obtained through their procurement processes and financial arrangements. Therefore, it is still extremely important for Trusts to consider the full cost implications of entering such arrangements. This may, for example, include considering the comparative cost of an outright purchase and available reserves.

The following assets have been granted prior consent by the Secretary of State for Education:

• all existing leases in place before 1 September 2024 for items included in this list
• leases related to IT equipment (for example, laptops, tablets, desktop computers, printers, photocopiers, servers, door entry security systems, CCTV Systems, whiteboards and touch screen boards)
• leases related to telephony (for example, mobile phones, landline phones and telephone systems)
• leases related to catering and cleaning equipment (for example, tills, water coolers, vending machines, dishwashers, washing machines, ovens, fridges, freezers, water boilers, small kitchen appliances, crockery and cutlery)
• leases related to furniture (for example, desks, tables and chairs)
• leases related to bathroom and sanitary items (for example, hand dryers, towel dispensers, sanitary bins)
• leases related to gym equipment (for example, treadmills, free weights and weight machines, rowing machines and exercise bikes)
• leases related to groundskeeping equipment (for example, lawnmowers, string trimmers, leaf blowers and salt spreaders)
• leases related to LED lighting systems or to support renewable activity (for example, lightbulbs, control mechanisms and control panels) - consent is granted where the product has been sourced with support from the Department for Education through Get help buying for schools or from a recommended route on our Find a framework website
• leases related to minibuses and other vehicles for the use of the school
• leases related to temporary classrooms and equivalent structures (but not land leases they sit on, which may require separate consent – see school land transactions guidance)

Any leased assets not included in the list will still need to be submitted to the Secretary of State for Education for consent.

Separate guidance exists regarding leases for land and buildings.

At this stage, the guidance issued only considers finance lease arrangements and does not consider other forms of borrowing such as hire purchase or bank borrowing.

Get in touch

If you have any questions on this matter, contact your usual Bishop Fleming advisor.