VAT
VAT, partial recovery,zero, VAT exemption

Background

The University, in common with many of its UK counterparts, operates within a special partial exemption VAT regime, which allows it to recover only a small percentage of VAT suffered – currently 13%.

How does this operate in practice?

The University, in common with all VAT registered entities, must account for VAT on its income (Output tax) and pay VAT on expenditure (Input tax).

The University will usually have to account for VAT on income it generates from goods and services such as consultancy, car parking, catering, theatre, shop sales and also on charges made to its subsidiary companies.  Most of the University’s teaching and research income is exempt from Output tax, with some important exceptions.

Conversely, the University has to pay VAT on many of the goods and services it purchases. However, it can only recover a small percentage (currently 13%, see above) of this VAT incurred through its VAT returns. For example, of expected input tax suffered of £5.3 million in the financial year 2007/08, the University will only recover £690,000 from Customs.

Effect on University cost centres

In general many University cost centres cannot recover VAT on expenditure.  This means that the cost reflected in these cost centres will be the full cost of the invoice (net plus VAT).

A number of cost centres can claim partial recovery of VAT at the current rate of 13%.  These cost centres are typically administrative and provide a service to the University as a whole.  This means that the cost reflected in the cost centre is net plus 87% of VAT.

A few cost centres within the University can reclaim all the VAT they incur.  These are typically Research or Self-financing codes where funding received is directly from the Euroean Commission or commercial enterprises.

VAT exemptions and zero-rating

The University may be able to obtain VAT zero-rating relief in the following areas of expenditure: -

Printed Matter (pamphlets, leaflets, booklets etc)

Advertising(courses advertising, staff advertising etc)

Disabled Works

Medical, scientific, computer, video, sterilising, laboratory or refrigeration equipment for use in medical research, training, diagnosis or treatment. Refer to Procurement website.

Reverse Charges

Goods or services acquired from another EU member state should not attract VAT on the invoice from the supplier, if we supply the University VAT registration number (note that this applies generally where the goods or services are delivered to the UK – ie it is not the case where the supply is received within the other state such as when accommodation is provided by an hotel).

These costs will however be liable to a self assessed UK VAT charge, if the goods would have been liable to VAT if purchased in the UK.  This self-assessed charge will be added to the cost borne by the relevant cost centre on a quarterly basis.

Reduced Rate VAT – 5%

This is applicable to the construction of new student residences, fuel and power used for residential purposes and certain energy saving materials for use in student residences.

VAT Queries

The above information is for general guidance only. If you have a query on any aspect of VAT relating to the University please contact Mark Harvey.

Copyright © 2012 University of Ulster