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A new special free school for 120 pupils of secondary school age is in the pipeline for the former Danley Middle School site.
Land at the new Halfway Houses Primary School in Danley Road, Halfway, has been earmarked for the new school.
Kent County Council, which submitted a bid in October for cash from the Government, said it is now in the process of finding a sponsor.
Once a sponsor is found, the free school will be set up by an organisation or group, funded by the Government but not controlled by the local authority. It is expected to open in September 2021.
The Department for Education has announced 3,500 extra school places will be created across the country for pupils with special education needs.
Kent County Council’s cabinet member for Children, Young People and Education, Roger Gough, said: "Following yesterday’s announcement by the Department for Education that 3,500 extra school places will be created for children with Special Education Needs (SEN), we can confirm a new special free school is being planned for the former Danley School site on the Isle of Sheppey.
"The school will provide for children requiring a specialist placement for social, emotional and mental health (SEMH) needs with Autism spectrum condition or communication and interaction difficulties.
'The new school will allow them to access suitable provision' - Roger Gough
"There is currently no special school on the Isle of Sheppey, meaning a significant number of pupils with SEN are required to travel substantial distances, off the Island, to the nearest suitable provision.
"The new school will allow them to access suitable provision within their local community, enhancing their opportunities to develop social links and become more independent."
A Department for Education spokesman said they did not know how much had been set aside for the Sheppey school.
Cllr Cameron Beart (Con), who represents Halfway, said: "I wrote to the Secretary of State for Education to express my support for this proposal and am pleased to see that it has been included in the list."
It comes as Medway council missed out on funding for its own free special school.