Guidance

Declare or seek approval for related party transactions: summary guidance

Updated 1 September 2023

Applies to England

The Academy Trust Handbook sets out reporting and approval requirements for academy trusts in advance of transacting with a related party.

1. Declaring related party transactions

Academy trusts must declare their intention to enter into a new transaction before confirming the transaction with a related party. This includes transactions being renewed with a related party.

Academy trusts do not need to declare income transactions with related parties. For expenditure related party transactions with a new supplier, academy trusts must confirm whether they have previously received a donation from the related party.

In line with paragraph 5.43 of the Academy Trust Handbook (ATH), salaries and other payments made by an academy trust to a related party under a contract of employment, through the academy trust’s payroll, are not in scope of this reporting requirement.

Academy trusts must report all related party transactions, regardless of value, in their annual financial statements as set out in the Academies Accounts Direction.

2. Seeking approval for related party transactions

Academy trusts must obtain ESFA’s prior approval, using the online form, for related party transactions starting on or after 1 September 2023, that exceed £40,000 for the supply of goods or services to the trust by a related party in the same financial year ending 31 August.

The £40,000 approval threshold applies to single transactions with the same supplier, the transaction value is not aggregated by supplier.

This approval requirement does not apply in the following circumstances:

• transactions for the supply of goods or services to a trust by the following educational establishments:
  • colleges, universities and schools which are sponsors of the academy trust
  • state funded schools and colleges, including academies.

This concession does not apply to transactions with a subsidiary of such a related party.

• transactions for the provision of goods or services to an academy trust with a religious designation, for essential functions fundamental to the academy trust’s religious character and ethos which can only be provided by their religious authority.

These related party transactions must be declared to the ESFA via the online form.

Novel, contentious and/or repercussive related party transactions are subject to separate arrangements. Trusts must obtain ESFA’s prior approval for any transactions with related parties that are novel, contentious and/or repercussive, regardless of value. Approval must be sought using ESFA’s online form. Trusts should carefully consider the impact of this requirement and its relevance to transactions involving the board chair and/or the accounting officer as set out in ATH 5.44.

A single request for approval can be submitted for a series of intended transactions with the same supplier if sufficient detail about each transaction is included in the evidence provided.

For transactions with a start date on or before 31 August 2023, approval will be required for transactions where the cumulative threshold is over £20,000 and the above concessions will not apply, as set out in the Academy Trust Handbook 2022 (5.42). This requirement does not apply to the provision of services to an academy trust with a religious designation, for essential functions fundamental to the academy trust’s religious character and ethos which can only be provided by their religious authority.

3. What is a related party?

Related parties include persons and entities with control or significant influence over the academy trust and members of the same group of companies.

You can find a full definition in the:

• Financial Reporting Standard 102, section 33
• Charities SORP, section 9.15 and appendix 1
• Academies Accounts Direction

You can read about the principles applying to related party transactions in the Academy Trust Handbook 5.35 to 5.59.

4. Preparing to complete the online form

Academy trusts must declare all expenditure transactions and seek approval where necessary before confirming such transactions with a related party using the online form.

The checklist sets out the type of evidence to provide when seeking approval for a related party transaction.

You need an Identity and Access Management System (IDAMS) account to use the form. You can register for an IDAMS account and set up other users to report related party transactions.

5. Do you have any questions?

For all enquiries for the Education and Skills Funding Agency, please contact us using the enquiry form.