VAT Guidelines

The University pays a large amount of VAT that is non-recoverable. The University cannot reclaim VAT on its EXEMPT activities (educational and research). There are exceptions to this, areas such as taxable research and trading activities such as the Arts Centre etc.

The application of the VAT laws to the University is particularly complex due to the wide range of activities that we undertake.  The University’s partial exemption status derives from the nature of the institution’s principal supplies of VAT exempt education and research. It follows that many other supplies outside these categories will be taxable at the standard rate.

Details of the VAT liability of activities is shown under the A to Z VAT Guidance notes together with zero rating certificates and flowcharts to help with determining the correct VAT treatment.

VAT : withdrawal of the VTA exemption for supplies of research between eligible bodies - for eligible bodies who supply business research services and those that commission research from eligible bodies. The UK received notification from the EC that its exemption for business supplies of research between eligible bodies does not comply with European legislation. The UK has  accepted that this is the case and will withdraw the exemption with effect from 1 August 2013. HM Revenue & Customs published a consultation December 2012 to gather information to allow them to assess more accurately the impact that the withdrawal of the exemption would have and to establish whether there were any possible options to mitigate that impact. The withdrawal will apply from 1 August 2013 to all written contracts that are entered into on or after that date. The government wants to mitigate the impact of the withdrawal of the exemption on supplies under existing contracts entered into before 1 August 2013. For supplies of business research where written contract was entered into before 1 August 2013, whether or not work has already commenced, the exemption will continue to apply to services within the scope of the contract.

VAT information sheet 11/13

Understanding the terminology of VAT often presents problems. Because VAT is a tax on the value added, it is necessary to differentiate VAT paid on purchases (Input VAT) from VAT charged on sales (Output VAT). The most commonly used terms can be defined as follows:

Standard rated supply	a supply of goods / services on which VAT is charged at the standard rate of 20%, e.g. a consultancy project and the associated consultancy fee
Lower rate	a lower rate of 5% is chargeable on fuel and power supplied for ‘qualifying use’, which is broadly defined as domestic (student residences) or non‐business use
Zero rated supply	a supply of goods / services on which VAT is charged, at the zero rate, i.e. 0%. For example the sale of a book. Any input VAT incurred on producing the zero‐rated supply can be recovered.
Exempt supply	a supply of goods / services on which VAT is not charged. E.g. a supply of education. With Exempt supplies, the University cannot recover any input VAT it suffers from suppliers;
Outside the scope of VAT	VAT is not charged and the financial transaction is excluded from the sales or purchases boxes of a VAT return. Pure grants are outside the scope of VAT as are inter‐faculty recharges
Outside the scope of VAT with the right to recovery	VAT is not charged but can be recovered on purchases. This classification tends to be used for supplies within the EU to customers in business
Net figure	the VAT exclusive purchase or sales price
Gross figure	the VAT inclusive purchase or sale price
VAT Fraction (1/6th)	‐ is a handy way of computing the standard rated VAT, contained within a gross sum. For example a gross receipt of £120.00 contains £120.00 x (1/6) = £20.00 of VAT.

 

VAT on UK invoices charged where appropriate

When invoicing customers within the UK then VAT should generally be charged. Some exceptions to this will be when an item is listed as VAT exempt (such as some printing activities), when the service being provided is for the direct benefit of students, when the customer can supply a VAT exemption certificate or if the invoice relates to charges for space in a building that has been classified as opted out for VAT purposes. An organisation being a charity is not in itself a reason for not charging VAT. Obviously VAT is a wide subject with many grey areas and if departments are unsure of any aspect of charging VAT on invoices contact Stephen Humphreys (ext: 8656) for advice.

VAT on invoices to other EU member states

When invoicing customers in other EU member states departments should obtain the customer's VAT registration number and quote this on the invoice. As long as this information is quoted then there is no need to charge VAT.

If the VAT registration number is unavailable then it may be necessary to charge VAT, contact us for further advice.

VAT on invoices outside the EU

Invoices to countries outside the EU are outside the scope for VAT so it should not be charged

The University, due to its status as an exempt charity and eligible body for VAT purposes, is able to take advantage of special VAT reliefs available on certain purchases which mean we either don't have to pay VAT or can pay a reduced rate of VAT.  For each of these reliefs specific conditions have to be met.

If we want to take advantage of these reliefs we normally need to supply evidence to our suppliers that we are a qualifying charity or eligible body and provide a written declaration or ‘certificate’ confirming that the conditions have been met.

Most of these VAT reliefs on purchases are available only to the University and not its subsidiary companies.

There are also general reliefs available that zero rate or exempt from VAT supplies of certain goods and services.

Main areas impacting on the University are summarised in this guidance.  More detailed guidance and assistance in each area is available from the Finance Department.

Construction of Buildings

The construction of buildings and certain works to protected buildings, intended to be used by a charity solely for non-business purposes or as a village hall or similar, can be zero-rated subject to certain criteria being met.

In this respect education is regarded for VAT purposes as a business activity and hence this potential relief is limited to buildings which are primarily to be utilised for publicly funded research.

Buildings constructed for residential purposes may also qualify for relief.

Zero-rating may also be possible for parts of buildings specifically adapted for use/access by the disabled.

This is a complex area and for further details and consideration of potential for claiming relief on a particular project please contact the Finance Department.

Charity-funded medical, veterinary, and scientific equipment for medical and veterinary research etc.

Certain goods and services can be zero-rated when purchased by the University with charitable or donated funds.  They may be also be zero-rated when purchased by any individual, group or organisation for donation to the University.

In this respect qualifying goods include medical, veterinary and scientific equipment for use in medical or veterinary research, training, diagnosis or treatment.  Computer software may also be zero rated when purchased solely for these purposes.

The repair, maintenance and installation of these qualifying goods will also be zero-rated.

Detailed guidance is available from the Finance Office in respect of what types of equipment and activities are within this exemption.

Certificates to use to claim exemption are as follows:

Advertising and goods associated with donations

The University, due its charitable status, can advertise VAT-free in any medium that communicates with the public, such as a newspaper or television, providing the advert is placed on someone else’s time or space. This means that if someone charges the University for an advert, for example in their magazine or on a radio programme or for displaying a poster on their premises, they do not have to charge us VAT.

The VAT relief does not cover costs for advertising in our own media - for example in our own magazines or on our website.

Adverts qualifying for the relief can be on any subject, including staff recruitment.

Zero-rating also extends to certain goods used by charities to collect monetary donations.  The categories of goods that can qualify are certain printed stationery (appeal letters and associated printed envelopes), collection boxes, and lapel stickers and badges.

Aids for people with disabilities etc

If the University is purchasing certain goods and services to be made available to disabled people for their personal or domestic use they may be able to be zero-rated. 

Relief may also be available for equipment purchased to assist the blind and severely visually impaired.

Please contact the Finance Department for further details.

Fuel and Power

The University has certain activity that qualifies as a non-business activity (publicly funded research) and also has residential accommodation.  Supplies of fuel and power for these areas may qualify for the reduced rate of VAT, currently 5 per cent.

The installation of energy-saving materials, such as central heating and insulation in residential accommodation or in a building used solely for publicly funded research may also qualify for VAT at the reduced rate.

For further information please contact the Finance Department.

Purchases from Abroad

Goods

All goods entering the UK from outside the EU are liable for import duty and VAT at the applicable rates. Duty is calculated on the declared invoice value of the goods entering the EU. Universities may apply for relief from import duty for scientific research. Relief can also be claimed for equipment used in medical and veterinary research, training and diagnosis. When duty relief is granted, VAT relief will also apply.Import duty and VAT will be charged at the point of entry into the UK (ie Airport or Port). The carrier handling these goods will normally require payment before the goods are released. Goods entering the UK from other EU member states will not be charged duty as goods can move freely within the EU without charge. VAT will be charged by the Finance Department on taxable items at the standard rate (currently 17.5%) and will be paid over to H M Revenue and Customs in the quarterly VAT returns.

Services

This section explains how to determine the place of supply of the services you receive from outside the UK and who must account for any VAT. For VAT purposes the place of supply is the place where a supply is treated as being supplied, or made. This is the place where it is liable to any VAT. It is essential that you think carefully about the nature of any services that you receive. You must have a clear understanding of the nature of services before you can identify the appropriate place of supply rule.

It is assumed that services are made where the supplier belongs (this is known as the basic rule), and VAT will be charged on the invoice, unless any of the services are covered within the special rules. The basic rule will only apply if a supply of services cannot be seen to fall under any of the special rules.

VAT and Purchases from outside the UK

The table below details some of the types of services, which have special rules, and the appropriate VAT treatment.

Services relating to land and property The place of supply of services that relate to land or property are where the land itself is located, irrespective of where the customer or supplier belong. Examples of land related services are: Hotel accommodation Exhibition stands The supply of plant or machinery, together with an operator, for work on a construction site. Services of estate agents, auctioneers, architects, surveyors, engineers and similar professional people relating to land. Legal services such as conveyancing or dealing with applications for planning permission. Packages of property management services.	VAT Treatment VAT is due in the country where the land itself is located, therefore it willbe added (if appropriate) to the invoice by the supplying company. If the land is located in the UK but the supplier belongs outside the UK,VAT will be added by the Finance Office.
Services supplied where performed: These are services involving physical performance, where they are physically carried out, irrespective of where the supplier or the customer belong. Examples of services supplied where performed are: Scientific services, eg technicians carrying out tests or experiments in order to obtain data. The final compilation of your record of results. Sporting services, eg sportspersons appearing in exhibition matches, races or other forms of competition. Services relating to exhibitions, conferences or meetings, eg an oral interpreter at an event or meeting or carpenters and electricians erecting and fitting out stands at exhibition venues. Educational and training services. Such services are exempt in the UK when made by Universities. Valuation of, or work carried out, on goods. Services covered by this section generally relate to a live event or physical activity.	VAT Treatment VAT is due in the country where the service is physically carried out and will be added to the invoice by the supplying company. If the service is carried out in the UK but the supplier belongs outside the UK, VAT will be added by the Finance Office.
Passenger transport The place of supply of passenger transport is where it takes place.	VAT Treatment VAT is due in the country where the supply of passenger transport takes place
Services supplied where received Transfers and assignments of copyright, patents, licenses, trademarks and similar. Advertising services. Services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services; data processing and provision of information (but excluding from this head any services relating to land). Banking, financial and insurance services (including reinsurance, but not including the provision of safe deposit facilities). The supply of staff. The letting on hire of goods other than means of transport.	VAT Treatment VAT is due in the country where the service is received. If the service is received in the UK by the University then VAT will be added at the appropriate rate by the Finance Office.

Why is VAT added by the Finance Office?

Normally, the supplier of a service is the person who must account, to the tax authorities, for any VAT due on the supply. However, in certain situations, it is the customer who must account for any VAT due.

In practice this means we have to charge VAT to ourselves (and pay over to HMRC in our quarterly VAT returns) on relevant goods and services purchased from other EU member states, and services received from outside the EU.

Goods purchased from outside the EU will have the relevant VAT and import duty charged at the point of entry into the UK (normally by the carrier).

Changes effective from 1 January 2010 and 1 January 2011

Service description	Place of supply from 1 January 2010	Place of supply from 1 January 2011
Services of work on, or valuation of moveable goods; and ancillary transport services.	B2B supplies are subject to the B2B general rule. See section 5. B2C supplies are made where the services are physically performed.
Services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities (including fairs and exhibitions); and ancillary services relating to such activities, including services of organisers of such activities.	B2B and B2C supplies are made where the services are physically carried out.	B2B supplies are subject to the B2B general rule and the place of supply is where the customer belongs. See section 5. B2C supplies are made where the activities actually take place.
B2B supplies of services in respect of admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events (including fairs and exhibitions); and B2B supplies of ancillary services relating to admission to such events.	Supplied where services physically carried out.	The place of supply is where the events actually take place.

Further information can be obtained from: HM Revenue & Customs website

Notice 741A Place of Supply Rules

Notice 741A Place of supply of services

How to report your EU sales