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The VAT treatment of research income will differ depending on the nature of the arrangements and the parties involved. The Research Operations Office will determine the appropriate VAT rate for each grant as the VAT status impacts both the research budget and the wider University's expenditure and VAT recovery.

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VAT on research funding
Self-charging VAT on goods and services from overseas


VAT on research funding

There are different types of VAT treatment for income received for research grants:​

•    Outside the Scope (OS) – public funded research grants & collaborations qualifying for VAT-free status
•    Standard Rated (SR) – research supplied to commercial entities and collaborations that do not qualify for VAT-free status
•    RS-services RoW – research services supplied to commercial sponsors outside of the UK and collaborations outside the UK that do not qualify as outside the scope
•    RG – goods RoW – research goods exported outside of the UK

For further information, see the VAT flowchart, sponsor cards & collaboration guidance in Appendix A, Establishing the VAT rate of Research Grants.


The VAT rate applied to an award can be viewed in the Award Status screen or on the header of the Award Status report. The last two letters of the GL source of funds mapping code for a research grant indicate the sponsor type and the VAT treatment.

Standard rated 20%

Standard rated grants do have VAT charged on invoices to the sponsor. As these are taxable supplies any VAT on directly related purchases is recoverable from HM Revenue & Customs (HMRC).

The last letter of the source of funds mapping code will be A, which will automatically trigger the VAT reclaim from HMRC, leaving only the net value as a cost to the grant. UK commercial sponsors are normally classed as standard 20%.

Zero rated

For zero rated (this includes RG and RS) grants, any VAT charged on related purchases is also recoverable from HMRC. This is because zero-rating is a type of taxable supply, and it follows that VAT on directly related purchases is recoverable. No VAT will be charged to the sponsor.

The last letter of the source of funds mapping code will be A, which will automatically trigger the VAT reclaim from HMRC, leaving only the net value as a cost to the grant. Typical examples of sponsors whose grants are normally zero rated are commercial organisations outside the UK.

Outside the scope

Outside the scope grants are not liable to VAT so we are not able to reclaim the VAT from HMRC on any purchases. Any VAT paid will be coded to the grant as an additional cost. The last letter of the source of funds mapping code will be B. Typical examples of grants classed as outside the scope are those from Research Councils, charities and the European Commission.

NIH grants

Any taxes on NIH grants are treated as an ineligible cost, consequently any taxes (eg. UK VAT, foreign VAT, sales tax, excise duty) included in purchases/expenses which relate to an NIH grant must be separated when processing in UFS. Code the taxes to somewhere other than the grant (eg. from the department’s share of overheads and apply ‘No UK VAT’ to all the lines.

Horizon 2020

Horizon 2020 grants are typically treated as outside the scope of VAT, therefore we can’t reclaim the VAT on associated purchases from HMRC. Any VAT on purchases can be included as an additional cost on the grant.

However, if the funding from a Horizon 2020 grant is used to subsidise a business activity, for example the research results in something which the University or our partners can exploit commercially, the University is able to recover VAT on purchases from HMRC, subject to the normal rules.


Self-charging VAT on goods and services from overseas

If you purchase goods or services from outside the UK the university may be subject to additional VAT and import taxes.

  • Purchases of services from outside the UK are likely to require a self-charge (known as the reverse charge) to be made by coding the invoice to SERVICE TAX. 
  • Importing goods from outside the UK is now subject to customs declarations. Import VAT & duty costs may apply unless appropriate reliefs can be used.

Please see the Import Export Hub website for further information.

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