The Assisted Instrument Purchase Scheme (AIPS) was conceived to help reduce the cost of buying an instrument; it allows parents to buy an instrument without having to pay the VAT.
The parents should find an instrument from the shop of their choice then, pay the school the price less VAT, the school orders the instrument which is delivered to the school and the retailer is then paid but now including VAT later reclaimed by the school from HMRC.
Changes to the scheme meant that a small charge could be levied but only to cover the administrative costs and its existence must be made known to the parents; another change was that local authorities and county councils were allowed to supply on the same bases to aid the schools who found administering the scheme too time consuming or costly.
At least that was the theory.
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The first evidence that the rules were being flouted was when parents were told by some local authorities and county councils that the instruments had to be purchased from specific suppliers or direct from the authority/council itself.
Whilst in complete contravention of the AIPS rules the councils/authorities have placed themselves in a catch-22 situation; some sign contracts with box-shifters in order to get a large discount often paying just a pound or two above the wholesale price. Worse still, they often charge retail prices. I am aware of at least one county council who currently charges £162 for a violin outfit for which I charge £109 (both ex. VAT and ‘set-up’). Not exactly the benefit envisaged when the scheme was instigated.
The ramifications and resultant questions are fascinating. If authorities/councils are now retailing instruments that then qualifies as a taxable supply. Should they be taxed accordingly?
If a business is not run under the proprietor’s name it has to be registered as a company so that an unhappy customer can have legal redress. Who is ultimately responsible for the instruments being sold by the authorities/councils if the customer is not satisfied?
If the authority/council is retailing then are they allowed to run the AIPS? If the authority/council income exceeds £75,000 on instrument sales, do they have to register for VAT?
If the authority/council is flouting the AIPS rules should they lose ‘hub’ status?
And finally, who supports the child when the instrument needs a repair and the local shop has closed down due to lack of sales?
I would be grateful if anyone, who has experience of these or similar trading practices or a clearer knowledge of the law, could tell me. I think a united front and an approach to HMRC might be in order. email@example.com