Academy trust which has generated income of more than £12m from phonics product starts “investigation into its tax status”

A small multi-academy trust which has generated income of more than £12 million in three years from a phonics product faces a government fine after initiating an “investigation into its tax status,” Education Uncovered can reveal.

The south London-based Wandle Learning Trust, which is associated with the Little Wandle phonics programme, reported in its annual accounts that it had wrongly not registered itself for VAT in previous years, and that it was now facing a “historical VAT liability” and a fine. The accounts state that it is likely that, as a result, the trust “will face late filing penalties from HMRC, which are not deemed to be a proper use of public funding”.

The development will draw fresh attention to Little Wandle, which is operating in more than 5,000 schools and has generated extraordinary revenue for this five-school trust, based at a primary school in Wandsworth, south London.

The recently-published 2023-24 accounts for the Wandle Learning Trust show that £4.2m of income was generated from the Little Wandle Letters and Sounds Revised product last academic year. This comes on top of income of £4.6m in 2022-23, £3.4m in 2021-22 and £299,000 in 2021-22.

Background

Education Uncovered started reporting on the Wandle Learning Trust and Little Wandle last year, revealing last April that the academy trust had received £4.6 million in 2022-23 alone for Little Wandle Letters and Sounds Revised.

That phonics programme, which is thought now to be the second-largest in England after Ruth Miskin’s Read Write Inc, was set up by Mark Siswick, now co-chief executive of the Wandle Learning Trust, and Rachel Davis, the long-serving head of Little Sutton primary school in Sutton Coldfield, Birmingham, in 2020/21.

The Wandle Learning Trust’s latest accounts, for 2023-24, show that an extra £4.2 million of income was generated for the trust by the Little Wandle product that year. This is slightly down on 2022-23. However, it still means that £12.5 million of income was generated for the academy trust by the product over the four academic years from 2020-21, as revealed in the trust’s accounts.

These are extraordinary sums, for a trust which now has only five schools – one secondary and four primaries - and whose latest accounts say it had 2,701 pupils as of January last year, or less than the size of two medium-sized secondaries.

Tax investigation

The latest accounts also show, however, that the trust has been investigating its tax status. Two sections of accounts near their start outline this, using identical wording. One is signed by the accounting officer and co-chief executive, Christian Kingsley, and the other is within a report published within the accounts by the trust’s independent reporting accountant, from the firm Price Bailey LLP.

These sections state: “The Trust has initiated an investigation into its tax status. Following this investigation the Trust has concluded that it should have been registered for VAT in previous years. Whilst legal and financial advice had been sought in previous years, no definitive action has been recommended until very recently. As a result of this conclusion, it is likely that the Trust will face late filing penalties from HMRC, which are not deemed to be a proper use of public funding. The majority of the historical VAT liability and potential fine relates to the Little Wandle Letters and Sounds program [sic].”

The statement suggested that there would not be a major impact on the WLT schools, perhaps because of the huge reserves the trust has now built up via Little Wandle.

It stated: “We estimate that the impact of resolving this issue on WLT schools will not be material. The Trust plans to appeal these fines, given the circumstances under which they arose. However, until this appeal process is completed, the Trust is deemed liable for penalties payable.”

Price Bailey also reported the trust having to pay another fine.

It said: “Additionally, a separate fine of £1,250 was issued in respect of late LGPS [local government pension scheme] reporting to Wandsworth Council.”

Later on in the accounts, in notes to the figures in the financial statements themselves, under “contingent liabilities,” it is stated: “As a result of investigations that remain in progress as at reporting date, there exists a possibility that the Trust is liable to pay a corporation tax bill as a result of delivering education overseas, and may also be subject to a VAT liability on a specific stream of income that has yet to be determined.

“Should these liabilities crystallise, they will be recognised in the accounting period in which an economic outflow becomes reliably measurable.”

Where does the money go?

With the Little Wandle product clearly having been a huge money-spinner for the trust, a simple question suggests itself: where does the money go?

An income of £12.5 million over four years would translate as approaching £5,000 per pupil, based on 2,700 being in the trust, which is only its current size having taken on one of its five schools during 2023-24.

However, it appears from the accounts that much of this income is sitting in reserves.

The accounts list the trust as having a specific fund called “Little Wandle Letters & Sounds,” whose balance stood at £5.2 million as of the start of the 2023-24 academic year. With income for this fund exceeding expenditure by £1.98m during 2023-24, by August last year it stood at £7.2m.

The accounts say that the “Little Wandle Designated Fund” can be spent however the trust chooses. They state: “This fund represents unrestricted monies by Little Wandle Letters &Sounds that can be spent in any manner in line with the Trusts [sic] charitable objectives.”

The trust’s charitable objectives are listed as the obvious one of running its schools successfully, but also providing recreation facilities for local people, and “to improve the effectiveness of phonics teaching in schools across England through the dissemination of high-quality materials and assessment techniques in schools”.

The phonics objective was included within the trust’s accounts for the first time in 2022-23, so the year before last. This appears to be the first year that the accounts have included a specific statement about how the money in the Little Wandle fund can be spent.

Will the money in the Little Wandle fund be re-invested into the phonics product itself? The accounts may suggest this, as they also state that: “Contained within the…Wandle Learning Trust fund balance is an amount designated for [my italics] the Little Wandle Letters & Sounds programme of £7,220k (2023: £5,238).”*

However, some of the money generated by the phonics programme found its way last year to the academy trust’s central operations budget.

Little Wandle Letters & Sounds is listed as contributing £229,000 in 2023-24 to the trust’s central services. This was more than six times the figure of £37,000 for the previous year.

The accounts say that this topslice, which also saw its schools paying six per cent of their core income, paid for a range of services including “CEO support and advice,” financial services, IT support and school improvement.

Six per cent could be seen as a relatively large amount for schools to pay for this central operation, given the amount of money it has generated through the Little Wandle product.

Executive pay

The Wandle Learning Trust is also paying its central team handsomely, given its small size, the accounts suggest. It may point out, however, that, as well as the five schools – which the accounts say is due to increase to six – it runs a “National Teaching School Hub” – teacher training – an English Hub and a Maths Hub.

Nevertheless, again the figures suggest a high number of people on six-figure packages for a trust of this size, with the two joint chief executives seemingly on approaching £350,000 together, in salary alone.

The accounts state that two people at the trust were paid £160-£170,000 in 2023-24, which is around the salary of the prime minister. This an increase of at least £10,000 on the previous year, when two people were paid £140-£150,000 each.

It is not stated in the accounts who those people were, with both co chief-executives no longer director/trustees of the organisation, and only academy trustees having to have their pay declared against their names.

However, Mr Siswick and Mr Kingsley were trustee/directors until 2022-23 and appear to have been the highest-paid people in the trust before they stepped down from these board positions, earning £130-£135k and £135-£140k respectively in 2021-22.

The trust also has data on its website about executive pay as of 2022-23, which includes employer’s pensions payments. This had its two top-paid people on a package of £180-£190,000. This suggests that benefits including pensions during that year were in the region of £40,000, for each of these two people.

The latest accounts, for 2023-24, also state that the trust had a further person paid £150-£160k, in salary alone, another one on £120-£130k and a further two on £110-£120,000, so six people in total on £100,000 plus, compared to only four the previous year.

Overall, the trust’s number of people paid £60,000 or more increased from 31 to 49 during 2023-24, the accounts also reveal. Spending on these employees rose by around** £1.5 million or 60 per cent during those 12 months, they also suggest. This is despite the trust’s pupil roll only increasing by 436 pupils, or 20 per cent during that year, as recorded in the accounts.

Trust response

I emailed Wandle Learning Trust about this, including the tax investigation and asking where the money from Little Wandle would be spent. There has been no response as yet.

*There appears not to be a specific line in the accounts setting out spending on the phonics product specifically. “Income,” after all, could be balanced to some extent by expenditure on Little Wandle but, again, the latter appears not to be detailed. The rise in reserves generated by the product shows how much has remained for future spending, as a result of the product.

**Academy trusts generally only have to disclose employee pay, for those who receive at least £60,000, within £10,000 bands, rather than giving precise amounts. I have calculated this number assuming that each person whose pay features in this section of the accounts was actually paid in the middle of the published £10k band.