The University is registered for VAT and hence is as a "taxable person". Our VAT registration number is 823 8476 09.
It is also an exempt charity. As an exempt charity it has no charity number. Anyone requesting the number should be advised that we are an exempt charity under Sch 3 of the Charities Act 2011.
The University generates income which may be outside the scope of VAT, VATable, zero-rated or exempt, and cannot normally recover VAT it has had charged on its' purchases, which therefore makes the VAT charge an additional cost.
This can make the VAT issues in the University complicated and difficult to understand.
The University is a "taxable person" and as such has to add VAT on to the sale price of all standard rated and reduced rate business transactions it enters into. It does not have to add VAT where the income is "outside the scope" of VAT or if it falls under one of the categories for VAT exemption or zero-rating.
E.g. The University sells a second hand computer to a member of staff
- It's within the scope of VAT because money has been received in return for goods
- There is no exemption or zero-rating available for the sale of a computer to a member of staff
Therefore the sale is standard rated and VAT must be added to the price.
However, much of the income received by the University is either:
- Not received in the course of business e.g. research council and charitable research grants and is therefore outside the scope of VAT; or
- Qualifies as being "exempt" from VAT as it is a supply of education.
Where VAT is charged on a supply by the University, the VAT is being collected on behalf of HM Revenue and Customs (HMRC). At quarterly intervals the University pays HMRC the total amount it has collected on their behalf.
E.g. A University department raises an invoice for £1000 plus £200 VAT making a total of £1,200.
- The University department will receive the £1000
- The accounting system allocates the £200 VAT to a separate account so that it can later be transferred to Revenue and Customs.
More detail on the VAT treatment of University income is given in section Sales/Income in the UK, Sales to Members of the EC, Sales to Rest of World and Common Errors in the VAT treatment of income.
The University pays VAT in the same way as any other business on supplies of goods and services but there are exemptions and reliefs which can apply to some of the University's transactions, because the University is a charity, or research institution for the purposes of the reliefs. More details are given in sections Typical Purchases in the UK, Purchasing goods from the EC, Purchasing Goods from outside the EC and Purchasing services from outside the UK.
VAT is therefore a cost that will need to be taken account of when preparing budgets or business plans. VAT reclaims are available for expenditure on commercial research grants and for purchases used for VATable trading activities.
The financial system automatically reclaims VAT incurred on purchases coded to reclaimable research grants. VATable trading activities can also be set up with a reclaim provided that the Tax team are made aware of the need for a reclaim.
If you are charged VAT by a supplier please ensure that you have the original tax invoice/credit note – photocopied or faxed documents are not acceptable. Also, to be valid, invoices and credit notes should show the following information:
- The supplier's name, address and VAT registration number
- The date of the supply and an identifying document number
- The name and address of the customer i.e. the University
- The type of supply e.g. a sale, loan, hire etc.
- A description of the goods or services provided, their value and VAT status
- The total value, and the total VAT value in sterling
Please note that 'Pro-Forma' invoices are not valid tax invoices, even though they show most of the information above – they are merely a request for payment. The proper tax invoice should be forwarded by the supplier once payment has been made. As a general rule the University should not pay against pro-formas or in advance of the supply being received. See FPM Chapter 4 - Procurement procedures for more details re advance payments.
Retailers and other suppliers, who normally deal directly with the general public, have a concession where they do not have to provide an invoice unless the customer asks for one. In general if the supply is less than £250 (including VAT) they will issue a less detailed invoice.
E.g. A restaurant provides its customer with a less detailed invoice, just stating that it is a meal for 4 totalling £75 inc. VAT @20% on the 23rd Oct 2011.
To extract the VAT element from any inclusive amount multiply by 20/120 (1/6) i.e. the VAT included in £75 is £12.50
This is acceptable as long as it shows the supplier's name, address and VAT number, the time of supply, a description of the goods/services provided and for each VAT rate applicable, the total amount payable including VAT.