A recharge occurs when the initial supply of goods/services was between the supplier and the University. The University then recovers all or part of the costs from a third party. This recovery is a new supply by the University to the third party.
The key indicators that this is a recharge of goods or services are:
- The contract is between the supplier and the University (e.g. a purchase order, a formal contract - remember these may be verbal)
- Any dispute regarding the goods/services is between the University and the supplier or the University and the third party. The third party would not have any legal redress against the original supplier i.e. we took ownership of the goods.
- The supplier will have made any invoice out to the University rather than to the third party.
In these cases the source of funds will always be GAAA, an appropriate L transaction code should be used and the VAT liability of the supply to the third party will be determined by the nature of the onward supply. See sections Sales/Income in the UK and Sales to the Rest of the World for VAT rates on supplies.
Recharges to staff and students for their private use of University goods, facilities and services
Common examples of this are the use of the photocopier and private use of the telephone. On each occasion there is a supply of goods or services to the individual and the VAT will be dependent on what the supply is and who it is to. See Sales/Income in the UK for VAT rates on supplies.
Recharges to staff for private items purchased
Sometimes private purchases are made by staff through the University so they can benefit from the discounts that the University receives from the supplier, e.g. computers, office supplies. This is allowed but the full cost to the department (including an administrative charge to cover the processing costs) must be charged to the individual.
- If this occurs on a regular basis please contact the University Tax Team as it may be possible to reclaim VAT incurred on the original purchase.
- If you do not recharge at the full cost these will be classed as a taxable benefit and must be recorded on a P11D return at the end of the year.
If the University is invoiced for the goods then there are two supplies:
- the initial purchase by the University from the supplier, and
- he supply by the University to the staff member.
- Unless you have a specific trading account with a full VAT recovery on purchase costs, the value of the supply is the original cost of the item including VAT (gross cost) plus the administrative charge.
- If you have an appropriate trading account with a full VAT recovery on costs, then the value of the supply is calculated on the net cost of the item plus the administrative charge.
The full value of the income will be standard-rated unless the item can be specifically zero-rated as in the case of books. See Sales/Income in the UK for VAT rates on supplies.
Recharge of an employee's travel expenses to a third party
If this is part of an overall charge by the University to the third party for the services of an employee e.g. for a talk or lecture, the VAT rate is determined by the type of supply and who it is to. See Sales/Income in the UK for VAT rates on supplies.
If there is no fee paid other than the travel costs see Reimbursement of travel expenses by a third party - no fee for services for further guidance.