Schools in the UK are not like other businesses. A plumbing firm, a tech consultancy, or a high street shop all follow standard accounting rules. Schools follow a completely different set. Academy trusts must comply with the ESFA's Academy Trust Handbook. Maintained schools answer to their local authority's Scheme for Financing Schools. Independent schools report to the Charity Commission or Companies House, depending on their structure. Get the accounting wrong and you risk funding clawbacks, regulatory breaches, or worse.
That is why a growing number of school leaders, trustees, and governors are looking for an accountant for schools who understands this landscape. Not a general practice accountant who files a few charity returns on the side. A specialist who knows the difference between a GAG (General Annual Grant) and a PFI (Private Finance Initiative) schedule, who can prepare an ESFA budget forecast return, and who understands the specific rules around school land, assets, and staff costs.
This guide explains what a specialist accountant for schools actually does, the compliance risks you need to manage, and how to choose the right firm for your setting. Whether you run a single-form-entry primary, a multi-academy trust, or an independent school, the financial rules are too specific to leave to a generalist.
What Does an Accountant for Schools Actually Do?
A specialist school accountant covers several areas that a general business accountant would not touch. Here are the key ones.
Academy Trust Accounting and ESFA Compliance
Academy trusts are charities and companies limited by guarantee. They must file annual accounts to both Companies House and the Charity Commission, using the Charities SORP (Statement of Recommended Practice). They must also submit an annual Accounts Return to the ESFA, which includes detailed financial data, governance information, and a benchmarking section.
An accountant for schools who works with academy trusts will prepare these returns, ensure the accounts are filed on time (9 months after year-end for Companies House, plus the ESFA's own deadlines), and advise on the specific accounting treatments required. For example, academy trusts must recognise PFI assets and liabilities on their balance sheets in a specific way. They must account for GAG funding as restricted income. They must report on the number of teachers, support staff, and their associated costs in a standardised format.
Get these wrong and the ESFA can issue a Financial Notice to Improve, require a re-brokerage of funding, or in extreme cases, terminate the funding agreement. That is not a risk any trust wants to take.
Maintained School Budget Management
Maintained schools (community, voluntary-aided, foundation) do not file their own accounts. Their local authority does. But the school still needs a budget, a three-year financial forecast, and monthly management accounts. The headteacher and governing body are responsible for the school's financial health.
A specialist accountant for schools can help a maintained school prepare its budget return to the local authority, model the impact of falling pupil numbers on funding, and advise on the best use of the school's delegated budget. They can also prepare the school's annual financial return for the DfE's Consistent Financial Reporting (CFR) framework, which benchmarks spending across schools.
Independent School Accounting and Charity Reporting
Most independent schools are registered charities. That means they file accounts to the Charity Commission, and if they are structured as a company, to Companies House too. The Charities SORP applies, with specific rules around fee income, bursaries, endowments, and restricted funds.
An accountant for schools who specialises in independent schools will understand the SORP's treatment of charitable activities, the distinction between restricted and unrestricted funds, and the reporting requirements for large independent schools (income over £500,000) which must have their accounts audited, not just independently examined.
Payroll and Pension Compliance
School payroll is not straightforward. Teachers are on the Teachers' Pension Scheme (TPS), which has different contribution rates (currently 28.68% employer contribution, 9.6% employee). Support staff are typically on the Local Government Pension Scheme (LGPS) or a private pension. The two schemes have different rules on contributions, early retirement, and reporting.
A specialist accountant for schools will ensure that payroll is processed correctly for both TPS and LGPS members, that the employer contributions are paid on time, and that the annual pension returns (such as the TPS annual return and the LGPS annual return) are submitted correctly. They will also advise on the tax implications of salary sacrifice arrangements for pension contributions, which are common in schools.
Key Compliance Risks Schools Face
Schools face several specific compliance risks that a general accountant would likely miss.
ESFA Funding Clawback
The ESFA can claw back funding if a school or trust does not meet its conditions of funding. For example, if a school does not deliver the required number of hours of education per week, or if it does not meet the condition that all teachers are qualified, the ESFA can demand repayment. A specialist accountant for schools will help you track these conditions and ensure your funding is safe.
Pension Auto-Enrolment and Re-enrolment
Schools must auto-enrol eligible staff into a pension scheme. For teaching staff, that is the TPS. For support staff, it is typically the LGPS or a private scheme. But the auto-enrolment rules still apply. You must re-enrol eligible staff every three years. Fail to do this and the Pensions Regulator can fine the school. A specialist accountant will manage these cycles and ensure compliance.
VAT for Schools
VAT is a complex area for schools. Most school income is exempt from VAT (tuition fees, exam fees, boarding fees). But schools still incur VAT on their costs (building works, supplies, equipment). The VAT recovery rules are specific. For example, academy trusts can recover VAT on certain costs through the VAT rebate scheme. Maintained schools cannot. Independent schools may be able to recover VAT on costs related to their non-exempt activities (like catering or lettings).
An accountant for schools who understands VAT will ensure you are not overpaying VAT and that you are claiming all the rebates you are entitled to. They will also advise on the VAT implications of capital projects, such as new buildings or refurbishments.
Capital Accounting and Asset Management
Schools have significant fixed assets: buildings, land, IT equipment, furniture. The accounting treatment of these assets is specific. For academy trusts, assets must be capitalised and depreciated over their useful lives. The ESFA has specific guidance on what constitutes a capital asset and how to account for it. For maintained schools, the local authority typically manages the asset register, but the school is responsible for reporting asset movements.
A specialist accountant will ensure your asset register is accurate, that depreciation is calculated correctly, and that you are complying with the ESFA's or local authority's capital accounting rules.
How to Choose an Accountant for Schools
Not all accountants are the same. Here is what to look for when choosing a specialist accountant for schools.
Check Their Experience with Your Type of School
Ask them how many academy trusts, maintained schools, or independent schools they work with. Ask for examples of ESFA returns they have prepared. Ask if they have experience with the Charities SORP. If they cannot answer these questions clearly, they are not a specialist.
Look for Sector Qualifications
The best school accountants are often members of the ICAEW, ACCA, or CIPFA, with additional qualifications or training in the public sector or charity accounting. Some firms hold the ICAEW's School and Academy Specialist status. That is a strong signal of expertise.
Ask About Their Software
School accounting software is different from standard business software. Common platforms include PS Financials, FMS (Financial Management System), Sage for Schools, and Access Education. A specialist accountant will be familiar with these systems and can work with your existing setup, or recommend a better one.
Check Their Understanding of the ESFA Handbook
The Academy Trust Handbook is updated every year. A specialist accountant will know the latest version inside out. They will know the rules on related party transactions (which must be approved by the board and reported to the ESFA), the rules on reserves (academy trusts must hold a minimum of 3% of their income in unrestricted reserves), and the rules on borrowing (academy trusts need ESFA consent for borrowing over £50,000).
When Should You Hire an Accountant for Schools?
You do not need to wait for a crisis. Here are the specific triggers.
When you are converting to an academy. The conversion process requires a detailed financial due diligence review by the ESFA. A specialist accountant can prepare the financial projections, the opening balance sheet, and the budget forecast return that the ESFA requires. They can also advise on the accounting implications of the conversion, such as the treatment of the school's existing assets and liabilities.
When your school's income exceeds £500,000. At this point, independent schools must have their accounts audited, not just independently examined. Academy trusts with income over £500,000 must also have an audit. A specialist accountant can either act as the auditor (if they are registered with a recognised supervisory body) or help you prepare for the audit.
When you are applying for a capital grant. The ESFA's Condition Improvement Fund (CIF) and School Condition Allocation (SCA) require detailed financial projections and a robust business case. A specialist accountant can help you prepare the application and ensure your financial data is accurate.
When you have a Financial Notice to Improve. If the ESFA has issued a Notice, you need expert help immediately. A specialist accountant can help you prepare the recovery plan, negotiate with the ESFA, and ensure you meet the conditions of the Notice.
How Holloway Davies Can Help
At Holloway Davies, we are ICAEW qualified accountants with deep experience in the education sector. We work with academy trusts, maintained schools, and independent schools across the UK. We understand the ESFA Handbook, the Charities SORP, and the specific payroll and pension rules that apply to schools. We prepare ESFA returns, budget forecasts, and annual accounts. We help schools stay compliant and make the most of their funding.
If you are a school leader, trustee, or governor looking for a specialist accountant for schools, we would be happy to talk. Contact us to arrange a free initial consultation. Or explore our full range of services to see how we can support your school's financial health.
You can also read more about our approach to accounting for schools and other specialist sectors on our about page.
Frequently Asked Questions
What is the difference between an accountant for schools and a general accountant?
A general accountant files standard company accounts and tax returns. An accountant for schools understands the specific rules that apply to schools: the ESFA's Academy Trust Handbook, the Charities SORP, the Teachers' Pension Scheme, and the Local Government Pension Scheme. They also understand school-specific funding streams like GAG, pupil premium, and capital grants. A general accountant will not know these rules.
Do maintained schools need their own accountant?
Maintained schools do not file their own accounts, but they still need financial expertise. The headteacher and governing body are responsible for the school's budget and financial health. A specialist accountant can help with budget preparation, three-year forecasts, monthly management accounts, and compliance with the local authority's Scheme for Financing Schools. They can also advise on VAT, payroll, and pension issues.
How much does an accountant for schools cost?
Costs vary depending on the size and complexity of the school. A small primary school might pay £1,500 to £3,000 per year for basic compliance work (budget preparation, management accounts, VAT advice). A multi-academy trust with several schools and complex funding arrangements might pay £10,000 to £25,000 or more for full accounting and audit support. Always ask for a fixed fee quote before engaging a firm.
What is the ESFA's Academy Trust Handbook?
The Academy Trust Handbook is the ESFA's guide to the financial management and governance of academy trusts. It covers everything from budgeting and reserves to related party transactions and audit requirements. All academy trusts must comply with it. A specialist accountant for schools will know the handbook inside out and can help you stay compliant.
Can an accountant for schools help with VAT recovery?
Yes. Schools have specific VAT recovery rules. Academy trusts can recover VAT on certain costs through the VAT rebate scheme. Maintained schools cannot. Independent schools may be able to recover VAT on costs related to non-exempt activities. A specialist accountant will ensure you are claiming all the VAT you are entitled to and not overpaying.