Most University income is either exempt from VAT (eg student tuition fees, student accommodation and student catering), or outside the scope of VAT (eg grant income). However, any income where the University provides something in return to the customer (eg consultancy, or research where IP becomes the funder's property) may be liable for VAT, particularly where the customer is also based in the UK.

We generally don't charge VAT on supplies made to customers outside the UK, unless those customers are private individuals or a charity, government department or other body which has no business activities, in which case VAT may be applicable.

VAT recovery depends on the income stream.

Output Tax (Income)

You should assume University income is subject to 20% Standard Rate VAT unless there is a legislative reason why it shouldn’t be VAT’able

The VAT code is determined by the nature of what we are charging for.

Consultancy/Supplies of Staff/Services Rendered/Sale of Equipment (UK)

All forms of consultancy are taxable at the standard rate if the supply is delivered in the UK, this includes all incidental expenses. VAT on associated expenditure is fully reclaimable.

VAT is charged to the University on purchase invoices - we pay this to our suppliers.

The supplier invoice should clearly identify if VAT has been charged.

The University is liable to pay VAT on goods or services bought from outside the UK.

Purchases from outside the UK may also be liable to customs duty.

Certain goods and services are zero-rated or reduced-rated when bought by charities. The University has charitable status by statute and therefore can apply for certain reliefs.

For each of these reliefs specific conditions have to be met. The University must provide their suppliers with eligibility declarations certifying that the conditions have been met for that relief.

Charity funded equipment for medical and veterinary uses

Some equipment and consumables for medical research may qualify for zero rating (often referred to "VAT exempt purchases"). Funds to buy such equipment must come from charitable sources (which means that nearly all of the University's funding qualifies) and the extent of their use for medical research must be, in HMRC's terms, "substantial, real and continuing" which we would regard as meaning more than 50%.

Substances, drugs and chemicals

A charity engaged in medical or veterinary research can buy substances directly used for testing, or for mixing with other substances in the course of that research, at the zero rate.

A 'substance' can be natural or artificial, and can be in solid or liquid form or in the form of a gas or vapour. If the substance is bought in the form of gas the zero rating will also apply to the cylinder rental.

Advertising

As a registered charity, the University qualifies for zero-rating provided the supply of advertisement is made by a third party. The relief covers all types of advertisements on any subject, including staff recruitment.

Disability Provision

The University is entitled to zero rating relief on buying certain equipment for disability provision

How to Claim VAT Relief

The "VAT criteria" section should be completed on the requisition entering "Yes" and selecting the appropriate relief:

• CHARAD - Charity Advertising
• EQUIP - Medical or Veterinary equipment for research, training and diagnosis
• SUBST - Substances directly used for testing, or for mixing with other substances in the course of medical or veterinary research
• COMPS - Computer software used solely for medical research

The VAT code should also be changed to Z (at the top and bottom of the requisition) for UK supplies and RWZ for supplies outside the UK.

Zero rating certificates are required by the supplier where they are UK based and are an application by us to the supplier to consider zero rating. We have no automatic right to zero rating and there are penalties for misuse of these certificates.

It is important to remember that the University has the responsibility to make truthful statements and to provide an appropriate zero rating certificate to support the claim. HMRC will not seek to recover VAT due from a supplier who has taken reasonable steps to check the validity of our declaration, but has failed to identify an inaccuracy in our certificate and, in good faith, has zero rated a supply. However HMRC will seek to apply input VAT on a purchase where the certification was not valid and this will be a cost to your own budget should your claim be invalid.

Use of the RWZ code is regularly monitored by the Tax Team and you may occasionally be asked for additional information regarding the purchase.

Requisitions claiming relief will be routed to the Tax Team for approval.

Non-UK based suppliers (imports)

If the supplier is outside the UK we are also required to provide the VAT zero rating certificate to the carrier along with the correct import codes (CPC and commodity codes) before shipping, otherwise VAT and duty may be added.

Enter one of the following Customs Procedure Codes (CPC) on your declaration:

• 40 00 C13 for goods imported from outside the UK on which you claim relief from duty, and VAT if appropriate
• 49 00 C17 for goods imported from UK special territories on which you claim relief from VAT

For more information see the Government's trade tariff guide.

All goods imported into the UK from countries outside the UK are subject to import duty and VAT at rates applicable. Customs Duty will not be applied on goods with a value less than £135 but duty is waived if the amount of duty calculated is less than £9 (HMRC Reference: Notice 143, April 2012).

Universities, polytechnics and similar educational establishments can get relief of duty on the following goods imported from overseas:

• Scientific instruments and apparatus used for non-profit-making scientific research or educational purposes
• Spare parts, components and accessories specifically for scientific instruments and apparatus which have been granted relief and
• Tools to be used for maintaining, checking, calibrating or repairing eligible instruments and apparatus

Goods imported as freight or in baggage

Enter one of the following Customs Procedure Codes (CPC) on your declaration:

• 40 00 C13 for goods imported from outside the UK on which you claim relief from duty, and VAT if appropriate
• 49 00 C17 for goods imported from UK special territories on which you claim relief from VAT

Goods imported by post

Ask the sender to write 'Scientific instruments - relief claimed' clearly on the package and its customs declaration (CN22 or CN23).

For assistance with claiming reliefs, please contact the Tax Team.

The University uses the HM Revenue & Customs website to provide guidance on all VAT issues.  Please visit the HMRC VAT Guide in the first instance if you have a VAT query.

There are a number of HMRC guides listed in the “Useful links” section below.

We have produced a series of handouts to guide you through some areas of VAT which affect the University.  They contain useful examples of purchases and sales that commonly happen within the University of Exeter.

VAT Charges on Research (Supply)

For research to be considered a supply for VAT purposes there has to be a direct link between the payment received by the University and the services provided by the University.

Indications that VAT would apply to a research activity include:

• The recipient having access to the results before a commercial competitor.
• The funder being granted first option to use any IP that may be developed from the project (i.e. granted a licence to use Foreground IP for evaluation purposes).
• The funder having publication rights and constraints
• The sponsor providing funding in return for research which it may be able to exploit commercially in the future, albeit under a separate contract.
• When a research service attracts VAT, the VAT is also recoverable on associated expenditure. Expenditure should be budgeted net of VAT.

Research for VAT purposes is described as “original investigation undertaken in order to gain, advance or expand knowledge and understanding.”

Research does not include:

• confirming existing knowledge or understanding
• consultancy
• business efficiency advice
• collecting and recording statistics without also collating, analysing or interpreting them
• market research
• opinion polling
• writing computer programmes
• routine testing and analysis of materials, components and processes

When research is funded by the public or charitable sectors for wider public benefit it is deemed to be “non business” and therefore outside the scope so VAT isn’t charged.

VAT charged by suppliers on associated expenditure is also irrecoverable.

Although both of these categories result in no VAT being applied to the supply, the consequence is very different between them.

Zero rating is a rate of VAT, albeit 0%, i.e. it constitutes a taxable supply. This in turn renders any supplier of zero rated goods, services liable to register for VAT. The advantage of VAT registration is that VAT can be reclaimed on costs. However, a business making solely exempt supplies is not making taxable supplies, so cannot register for VAT. Consequently, all VAT incurred upon expenditure becomes an additional irrecoverable cost.

Where a supply could be either zero-rated or exempt, zero-rating takes priority.

Zero Rated Supplies

• Group 1 Food (exluding confectionery, hot food and food supplied by restaurants)
• Group 2 Sewerage services and water
• Group 3 Books (excluding ebooks)
• Group 4 Talking books for the blind and handicapped and wireless sets for the blind
• Group 5 Construction of buildings, etc
• Group 6 Protected buildings
• Group 7 International services
• Group 8 UK public transport
• Group 9 Caravans and houseboats
• Group 10 Gold
• Group 11 Bank notes
• Group 12 Drugs, medicines, aids for the disabled
• Group 13 Imports, exports, etc
• Group 15 Charities, etc
• Group 16 Clothing and footwear for children

Exempt supplies

• Group 1 Land
• Group 2 Insurance
• Group 3 Postal services
• Group 4 Betting, gaming and lotteries
• Group 5 Finance
• Group 6 Education
• Group 7 Health and welfare
• Group 8 Burial and cremation
• Group 9 Subscriptions to trade unions, professional bodies and other public interest bodies
• Group 10 Sport, sports competitions and physical education
• Group 11 Works of art
• Group 12 Fund-raising events by charities and other qualifying bodies
• Group 13 Cultural services ― admissions to museums, exhibitions, zoos and performances of a cultural nature supplied by public bodies and eligible bodies
• Group 14 Supplies of goods where input tax cannot be recovered
• Group 15 Investment gold
• Group 16 Supplies of services by groups involving cost sharing

When the University imports goods from overseas, VAT is also normally charged at the same rate as if they had been supplied in the UK.

When the University imports equipment mainly used for medical training or research from a country outside the UK, the goods can be imported free of duty and VAT.

See the reliefs section for more details on importing free of duty and VAT.

Goods

When purchasing Goods from outside the UK the VAT code on the requisitions should be RWG (unless claiming VAT relief).

The invoice from the supplier won't contain UK VAT as this will be added by Customs/courier on arrival into the UK.

VAT is still due to be paid at the point of entry into the UK which can be done by the courier who is handling the shipment will calculate the VAT and any duty payable and either request payment before shipment is made or if we have an account with them, will continue with the shipment and send us an invoice.

The courier requires the following information from the University:

VAT registration number (GB 142 0477 95), and

EORI number (GB142047795000)

Some suppliers will ship DDP (Delivered Duty Paid) in which case there will be no VAT to be added by Customs.

For invoices that relate to goods which will be used for the purposes of medical research, medical training, treatment or diagnosis, Tax Code RWZ should be selected on the requisition and VAT criteria also completed. This will trigger a simplified version of the VAT Zero Rating Certificate being sent to the supplier. This may also be required by the courier so they do not add VAT.

Services

Purchases of services from outside the UK are subject to reverse charge VAT.

The University must account for VAT due at the rate of VAT that the supply would attract if supplied in the UK, i.e. services of consultants, engineers, lawyers, accountants, data processing, the supply of staff, software, licence and other electronically supplied services, etc. For these types of purchases, please enter the VAT code RS (at the top and bottom) of the requisition.

VAT will be either charged to the expenditure account code or the input VAT account code, depending on the set up of the budget centre or project code. Finance will be responsible for collecting the reverse charge VAT and remitting the payment to HMRC in the quarterly VAT return.

Some services are “paid where supplied” and will not have VAT added but will contain VAT paid in the country of use/enjoyment, i.e. hotel accommodation, car hire, etc. For these types of purchases, please enter the VAT code OS (at the top and bottom) of the requisition.

All non-UK requisitions will be routed via the Tax Team for approval.

Reverse charged VAT added to purchases from outside the UK is paid over to HMRC in the quarterly VAT return as part of our statutory requirements.

There is no general exemption for charities from the VAT legislationOnly VAT registered charities can reclaim VAT they are charged, subject to restrictions on the amount they can recover.

The University of Exeter is a charitable body and an ‘eligible body’ for VAT purposes under Group 6 (Education), VAT Act 1994. The University pays VAT on most of its goods and services and can only recover a small percentage of VAT

Requisitions

On a requisition there are two VAT codes which are visible, the top VAT code comes from the supplier information and should match the VAT on the invoice, and the one at the bottom comes from the account code and will determine the VAT charged to the project or budget centre.

These should not be overwritten unless zero rating relief is being claimed or it is a non-UK purchase.

Sales invoicing/cash processing

Whether you are requesting a sales invoice or credit note via a form, directly entering an invoice or credit into T1 or entering a receipt, the VAT code is defaulted from the income nominal so it is important to select the correct nominal.

• HMRC - VAT guide (VAT Notice 700)
• HMRC - Charity funded equipment for medical and veterinary uses (VAT Notice 701/6) – zero rating
• HMRC - How VAT affects charities (VAT Notice 701/1)
• HMRC - Trade Tariff: look up commodity codes, duty and VAT rates
• Pay no import duties or VAT on importing goods for testing
• Pay no import duty and VAT on importing commercial samples
• Supply of staff and staff bureaux (VAT Notice 700/34)
• Finance Services FAQs

BUFDG (British Universities Finance Directors Group) offer a free e-learning course called "Extended Workforce: Employment Status and IR35":

• Register with BUFDG if you are not already a member (select 'University of Exeter' in the drop-down list).
• Then select the course from BUFDG's course list.

This refers to the IR35 process for Personal Services Companies which is an HMRC requirement to determine whether someone should be engaged via HR (and paid as an employee through payroll) or through the procurement route (and paid as a supplier by purchase order/invoice).

See Self employed/suppliers

VAT and Medical Zero Rating is a short UoE presentation that gives information on what is and isn't eligible for zero rating.

Help and assistance with tax and VAT queries:

(Mar 21: this information is currently being updated with the post-Brexit perspective and will be published here shortly)

Finance Services have prepared a short brief about how University staff can prepare and plan for purchasing goods and services from overseas or exporting after 1st January 2021 - Brexit Briefing

Staff with specific questions can book onto a Brexit Briefing Q&A‌ or email Procurement Operations any queries.

You can use the gov.uk website to check what tariff and/or commodity code applies to an import:

The Online Trade Tariff

All goods imported into the UK from overseas (incl. EU & EEA member countries) must be shipped by your supplier on Delivered Duty Paid terms (DDP).

If your supplier refuses to ship your goods on DDP terms, follow this UoE procedure:

How to Import Goods into the UK using Full Customs Declaration

Please email Procurement Operations with any import/export queries.

The UK Government has produced some step-by-step guides giving more details of the processes to follow:

• Import goods into the UK: step by step - GOV.UK

• Export goods from the UK: step by step - GOV.UK
• Get UK customs clearance when exporting goods: step by step - GOV.UK
• Get UK customs clearance when importing goods into the UK: step by step - GOV.UK

Import of Goods Notification Form

Export of Goods Notification Form

CIPS have produced some information on what procurement professionals need to know about Brexit.

(Please note this is an external link and the University is not responsible for the content)

Please email Procurement Operations with any Import/Export queries.