With public sector funding constantly under pressure, schools are always facing limited budgets. Buying new equipment or carrying out much-needed facility upgrades are often delayed due to funding constraints and strict rules on borrowing. The impact of this has meant that many schools have struggled to provide their students and staff with the facilities they need to reach their full potential.

But the rules around finance for schools have been updated, and it could be just be a game-changer for UK schools. Read on to discover how the introduction of IFRS 16 could help your school to spread the cost of new equipment or facility upgrades via fixed, affordable finance.

What’s changing?

In recent years, schools have only been allowed to lease equipment via an operating lease as they have not been allowed to enter a transaction classed as ‘borrowing’ without prior approval by the Secretary of State.

The accounting change is officially called IFRS 16, and its implementation enables schools to use finance leases and/or operating leases. While some assets still require approval by the DfE before they can be leased, the Department of Education has provided a list of assets that have been pre-approved.

This includes:

• IT equipment (e.g., laptops, tablets, desktop computers, printers, photocopiers, servers, door entry security systems, CCTV Systems, whiteboards, and touchscreen boards)
• Telephony (e.g., mobile phones, landline phones and telephone systems)
• Catering and cleaning equipment (e.g., tills, water coolers, vending machines, dishwashers, washing machines, ovens, fridges, freezers, water, boilers, small kitchen appliances)
• Furniture (e.g., desks, tables, and chairs)
• Bathroom and sanitary items (e.g., hand dryers, towel dispensers, sanitary bins)
• Gym equipment (e.g., treadmills, free weights and weight machines, rowing machines and exercise bikes)
• Groundskeeping equipment (e.g., lawn mowers, string trimmers, leaf blowers and salt spreaders)
• LED lighting system (e.g., lightbulbs, control mechanisms and control panels)
• Minibuses and other vehicles for the use of the school
• Temporary classrooms and equivalent structures

Why is it changing?

The implementation of IFRS 16 is an international accounting standard that all organisations must implement, so the DfE have had no choice but to adopt these changes.

When can schools start leasing assets under the new rules?

• For maintained schools these changes came into effect on 1^st April 2024.
• The updated Academy Trust Handbook will be released on 1st September 2024, which is when it is expected that academies will also be eligible.

It is important to note that the adoption of IFRS 16 will not enable local authority schools or academy trusts to take out any lease agreements without carrying out the appropriate due diligence. The School Financial Value Standard requires schools to ensure that any lease agreement they enter provides them with the best value for money.

What impact will IFRS 16 have for schools?

This change means that schools have more options available in terms of the types of assets and equipment they can finance, the lenders they can apply to and, as a result, the interest rates and terms available to them.

Schools can now finance a wider range of equipment (such as infrastructure hardware) which previously may not have ‘qualified’ under operating lease legislation. They can also spread the costs over longer periods of time which will reduce regular repayment amounts.

Here are some of the ways schools and other educational institutions benefit from leasing equipment rather than purchasing with cash.

Cost-effectiveness

Leasing can help schools access the latest equipment, technology, and facilities, without having to bear the high upfront cost of purchase.

Flexibility

Leasing can be tailored to meet the specific needs and budgets of each school.

Improved cash flow

By spreading the cost of acquiring assets over time, schools can improve their cash flow, as they will not have to bear a large upfront cost.

Up-to-date equipment and facilities

Leasing enables schools to regularly upgrade their equipment and facilities to provide the latest and most effective teaching resources to their students.

Can schools still use operating leases?

The traditional finance route for schools – known as operating or residual value leases – will still play a significant role in schools financing. This enables schools to lease equipment but return it at the end of its useful life, take advantage of warranties, and access the most up-to-date equipment for their staff and students.

Planning investment in your school?

At Bluestone, we understand that financing your school investment projects needs careful consideration, especially with limited budgets and tight timelines. That's why we're here to support you every step of the way.

Our team has over 27 years of experience helping schools and educational institutions secure the funding they need to improve their facilities, upgrade their equipment, and implement new programs.

We'll work closely with you to understand your specific financing requirements and provide you with a range of financing options tailored to your school's unique needs.

If your school is in need of new equipment, furniture, technology, vehicles or upgraded facilities and you are interested in spreading the cost of the investment via a fixed finance lease, contact our team today.

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