1. VAT to Basics Roger Bennett University Tax Manager FINANCE OFFICE
Departmental Finance Presentation
3 July 2012
FINANCE OFFICE
VAT to Basics
Roger Bennett
University Tax Manager

2. VAT – the Basics VAT - tax on final consumption of goods/services
Two fundamental rules for VAT to arise
Supply of goods or services is made in return for a consideration
Made by a VAT registered person
UK Rates (taxable)
20% standard rate
5% reduced rate
0% zero rate

3. Rates of Tax Standard Rate - 20% Reduced Rate - 5%
Majority of goods and services
Increased to 20% on 4th Jan 2011
Reduced Rate - 5%
Domestic fuel and power
Children's car seats

4. Zero Rate Select group of goods and services Some food (Groceries)
Books and newspapers
Children’s clothing
Public transport
Some equipment for the disabled
Certain purchases made by a charity

5. UoL Zero Ratings Zero rating on some goods and services, as a charity
Advertising - suppliers may ask for a certificate to declare our charitable status: contact the Tax Office if required
Goods and services for medical or veterinary research, training, diagnosis or treatment

6. VAT Exempt
Some goods and services are exempt as it is considered inappropriate to tax them
Health
Education
Financial Services

7. Outside the Scope of VAT
Donations
Given freely without the expectation of receiving anything in return
We buy or sell anything outside the EU
Special, complicated, rules apply
Depends on the place of supply
Foreign invoices always passed by Accounts Payable to the Tax Office
If unsure of VAT code contact the Tax Office

8. Using VAT Codes
All purchase and sales invoices in the University require a VAT code
Sales invoices
VAT code depends on the nature of what you are selling
Purchase invoices
VAT code depends on the rate we have been charged and we can also recover the VAT

9. A Quick Guide Income VAT code Expenditure VAT code Outside the ScopeY6 T3
VATable Supply YS T2
Zero Rate Supply Y3
Exempt Supply Y1
EU Export
Y4 (Goods)
Y5 (Services)
EU Import
T4 (Fully recoverable)
T5 (non recoverable)
PT (part recoverable)
Mixed Use Purchase PS

10. Output Tax (Income) VAT we charge on sales made to our customers BUT
We do not charge VAT on all sales as not all sales are taxable
We collect this VAT and pay it to HMRC as part of the quarterly VAT return

11. Types of University Income
VAT code is determined by the nature of what we are charging for
Raising a sales invoice/received cash for……
Education (exempt Y1)
Consultancy (standard rate YS) (taxable)
Donation (outside scope Y6)
Sale of Books (zero rate Y3) (taxable)
Research for a commercial sponsor (standard rate YS) (taxable)
Grant funding received from a not for profit organisation(Y6)

12. ‘Education’ (Exempt) Tuition fees Short courses and workshops
Academic conferences
Hire of rooms to external organisations
Medical diagnosis and treatment

13. Input Tax (Expenditure)
VAT charged to us on purchase invoices - we pay this to our suppliers
The supplier invoice should clearly identify if VAT has been charged – clues to look for on the invoice
Supplier VAT number
Rate of VAT
Amount of VAT being charged, i.e. net, VAT and gross

14. Purchase Invoices Recovery status of VAT
Input VAT (VAT on purchase invoices) can be fully recoverable, partly recoverable or non-recoverable
Recovery status depends on what the purchase has been used for

15. What are we using the Purchases for (UK suppliers)?
Purchases used to make a taxable supply, recovery status is fully recoverable
Taxable Purpose: any supply where we charge a positive rate of VAT to our customers, eg
Commercial research contracts (inc KTP projects)
Consultancy contracts
Testing and analytical services
Hire of staff
Catering – bar sales
VAT code is T2

16. Purchases used to make a non-taxable supply, recovery status is non-recoverable
Non-Taxable: any supply which is either exempt or outside the scope of VAT, eg
Teaching and short courses
Educational conferences
Non-commercial research (charity/government funded)
VAT code is T3

17. Purchases used to make a mixed supply, recovery status is partly recoverable
Mixed Supply: purchases to be used for Taxable and Non Taxable supplies, eg
Purchase of equipment that will be used for commercial research (taxable) and teaching (exempt)
General overheads, eg purchase of office equipment
VAT code is PS

18. Medical Zero Rating
The following equipment (and related parts/ accessories) qualify for zero rating if to be used by an eligible body mainly for medical or veterinary research, training, diagnosis or treatment
medical scientific
computer (and certain software) - video
sterilising laboratory
refrigeration
Full details on HMRC website ( or contact the Tax Office

19. Purchases from Non-UK Suppliers
Other VAT codes exist for purchases from overseas suppliers (see handout)
Where VAT has not been charged on invoice by overseas supplier, may need to apply reverse charge VAT (we apply VAT on the supply ourselves)
Automatic in SAP by using correct VAT code
The University must account for VAT at the rate the supply would attract if supplied in the UK, eg consultancy, financial advice, supply of staff, electronic services

20. Question Time!
We do not charge VAT on tuition fees, educational conferences, and hire of rooms.
What VAT code do we use to raise the sales invoice?
We have supplied consultancy and are charging the standard rate (20%) VAT.
We are supplying books. Books are zero rated therefore we are not charging VAT.

21. Need Assistance or Advice?
Taxation Section – Room 172, FJB
Roger Bennett (University Tax Manager) ext 2475
Raj Bhola (Assistant Tax Accountant) ext 2379
Jos Puri (Direct Tax Accountant) ext 5182
University Tax Office Website
HMRC website helpful for detailed VAT rules - use search or look under ‘charities’ or ‘education’ section