School VAT Deregistration: The 30 September 2026 Deadline
This article will count 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.
Your school client may still be submitting VAT201s believing they are a vendor. They have not been one since 1 January 2026. SARS wants the deregistration application in by 30 September 2026. That is eight days from today.
What actually changed
The Taxation Laws Amendment Act 5 of 2026 made every supply by a school registered under the South African Schools Act exempt from VAT, effective 1 January 2026.
Exempt supplies are not enterprise activity. So from that date the school stopped carrying on an enterprise, and stopped qualifying as a VAT vendor. The law was passed later in the year but backdated to January, which is exactly why so many governing bodies never saw it coming.
CIBA raised the cash flow problem while the Bills were still in draft, as we covered in Six Tax Changes CIBA Asked Treasury to Amend. The amendment went through. The operational instructions have now landed on your desk.
There is one exception. A school that carries on approved welfare activities as a welfare organisation may stay registered, but only to that extent, and only with a written VAT ruling from the Commissioner. That ruling application carries the same 30 September 2026 deadline, because SARS wants it resolved before 31 December 2026.
Deregistration is not automatic
SARS will not cancel the registration for them. The school must apply.
Complete the VAT123e, the application for cancellation of registration in respect of all enterprises.
Section A, reason for cancellation: state exactly this wording, "All enterprise activities have ceased on 31 December 2025".
Section B: the total value of enterprise assets held as at 31 December 2025, net of any adjustment where input tax was only partly claimed.
Email the completed form, together with the payment arrangement request if one is needed, to contactus@sars.gov.za with the subject line "VAT deregistration – Schools". Alternatively book a virtual appointment on the SARS site, selecting "Other" as the reason category and "VAT and PAYE registration/deregistration" as the appointment reason.
The exit VAT is the real number
Deregistering triggers a deemed supply. The school is treated as if it sold its enterprise assets the day before it ceased trading. That creates output tax, commonly called exit VAT.
The calculation is the tax fraction applied to the lower of cost or open market value of the goods and rights on hand at 31 December 2025. Cost includes the VAT incurred on acquisition, manufacture, construction or production, plus additional costs.
Three things practitioners get wrong here.
There is no five year cut-off. Every asset on which input tax was ever deducted is in scope, no matter when it was bought. Missing records are not an exemption. SARS expects you to use the best available information: fixed asset registers, general ledgers, annual financial statements.
Not everything counts. Goods and services where input tax was denied, such as entertainment and motor cars, are excluded. So are donated assets and anything acquired for no consideration, because the cost is treated as zero.
The number goes on the old return. The net exit VAT is declared in field 1A of the VAT201 for the tax period in which December 2025 falls, submitted through a Request for Correction on eFiling.
How to cut the exit VAT down
Most schools make mixed supplies and therefore only claimed a portion of the VAT on assets. Where that happened, the school may claim an adjustment for the VAT it never deducted, and set it off against the exit VAT. You need the documentary proof under Item G of Interpretation Note 92.
If the records simply do not exist, SARS allows a practical fallback. Use the average apportionment ratio for the last five years ending 31 December 2025. If that average is 5%, the school claims an adjustment of 95% of the VAT on the lower of cost or open market value.
Run that calculation properly and the exit VAT can drop dramatically. Skip it and the school pays tax it never had to pay. That difference is your value, in one spreadsheet.
There is a second recovery. Input tax incurred before 31 December 2025 that was never claimed may still be claimed, in VAT201 returns up to the November 2026 tax period, provided the supporting documents are on hand. The same documentary discipline we set out in Claiming input tax on Pre-Registration Invoices applies here.
Cleaning up 2026
Most schools carried on as normal for months after the law changed. That mess has to be reversed.
VAT charged since 1 January 2026 must still be declared on the relevant VAT201s. To get it back, the school must issue credit notes to recipients and actually refund them, then deduct it in the period the credit note was issued. No credit note and refund means no recovery. Credit notes must be issued and disclosed in returns due on or before the November 2026 tax period.
Input tax claimed on purchases made from 1 January 2026 must be reversed through a Request for Correction in the relevant period.
No penalties or interest apply on deductions claimed between 1 January and 31 March 2026, because the law was changed with retrospective effect.
Keep filing. The VAT filing category does not change. Nil returns are still due until the registration is actually cancelled.
The payment relief clients will care about
The school is only liable to pay the exit VAT from 1 January 2027, in 12 equal monthly instalments. No penalties and no interest, as long as those instalments are paid as agreed. Longer terms are possible but must be agreed with SARS upfront.
Send the payment arrangement request together with the VAT123e. A sample request appears in the VAT Reference Guide, Schools Exiting the VAT System. SARS issues a separate Payment Reference Number for each instalment, and these appear on the signed agreement.
One warning to pass on to the governing body: the school is only finally deregistered once the exit VAT is paid in full.
What to do this week
Pull every school client off your master list today. Include after-school centres, hostels and school trusts, and check whether each is actually registered under the Schools Act.
Build the asset schedule. Fixed asset register, trading stock on hand, consumables. Value each at the lower of cost or open market value as at 31 December 2025.
Calculate the apportionment adjustment before you file anything. Five year average ratio if the records are thin. This is the number that saves the client money.
Draft the VAT123e and the payment arrangement request together. One email, one subject line, before 30 September.
Flag any welfare activity. If the school runs a genuine welfare programme and wants to stay registered for that portion, the ruling application is also due 30 September.
Diarise November 2026. That is the cut-off for credit notes and for unclaimed pre-2026 input tax.
Quote for it separately. This is a defined engagement with a defined output and a hard deadline. It is not annual fee work.
School governing bodies are volunteers. Bursars are not VAT specialists. Nobody in that building is going to calculate an apportionment adjustment under Interpretation Note 92. You are the only person in the room who can, and there are eight days to prove it.
👉 Join CIBA and we'll show you how to turn a SARS deadline like this into advisory income your clients will thank you for.
