For something to be potentially liable for VAT it has to be a supply of goods or services. The word supply is defined as providing something (goods or services) in return for payment. If there is a supply of goods or services it would normally be liable to VAT but there are exemptions and reliefs available.
These links give examples of which VAT rate should be applied to some of the more common transactions the University enters into. This list is not exhaustive. The flow chart at Appendix B may also assist in the choice of VAT rate.
- Education
- Supplies closely related to education
- Room hire
- Services provided by medically qualified staff
- Postage
- Books and other printed matter
- Food
- Advertising
- Sales of medically exempt items (zero-rated)
- Reduced-rate sales
- Other sales
Please also remember that Financial Regulation 25.1 also specifies that
'Apart from core teaching, research and the organisation of conferences, when a new income-generating or trading activity is set up (whether in the UK or abroad), the Head of Department must consult the Taxation Section beforehand to consider the VAT implications and whether the activity constitutes trading which might be subject to Corporation Tax.'
Education
Education provided by a university for payment is exempt from VAT. This is the main VAT exemption for income received by the University.
'Education' includes not only the traditional supplies of education such as educational provision to undergraduate students, but all supplies of education. So the exemption includes income received from:
- seminars
- conferences
- short courses and lectures
- sporting and recreational courses.
It also applies whether the recipient of the education is a registered student of the University or a private individual attending a seminar or a business buying courses.
Supplies closely related to education
In addition to the main supply of education, exemption is also available for income received from supplies which are closely related to the supply of education and which are supplied either:
- directly to the student; or
- to another University
The term closely related generally refers only to goods and services that are for the direct use of the pupil, student or trainee and necessary for delivering the education to that person. This includes, for those attending the University or participating in a course, conference or seminar:
- any accommodation
- catering
- transport
- the photocopying of course materials
- supply of exam calculators
- charges for the use of computers by a student
However, there are some areas where the exemption does not apply. For example, alcohol is not seen as being a closely related supply. A charge for attending a conference which includes a meal may well have a VATable element which relates to the wine served at the meal.
There are also some areas where the exemption cannot be applied because it does not fall within the rules even though the ultimate beneficiary of the sale may be a student.
E.g.
- A charge to a lecturer (rather than the lecturer's institution) for photocopying lecture notes cannot be exempted because although the notes will be used by the students, the lecturer is not another University, College or School.
- A charge to another University, College or School for a lecturer's use of a computer cannot be exempted because the user is a lecturer not a student.
Also if the University were to charge a student for something that was not related to their education this would be VATable.
Room hire
Basic room hire is exempt from VAT unless the University has opted to tax the property, in which case the room hire is Standard Rated.
The only buildings the University has opted to tax are:
- the Computer Laboratory, William Gates Building JJ Thompson Avenue
- the Music School, West Road
- the ADC Theatre, Part Street
- The Entopia Building, I Regent Street (CISL)
The hire of a room in any of these buildings is therefore Standard Rated.
Note: If the charge covers additional costs, including equipment hire and facilities such as support staff, the charge becomes subject to VAT at the Standard Rate.
Services provided by medically qualified staff
Any medical services provided by a medical doctor are exempt. This also applies to medical services provided by registered nurses and dentists. However, if a medical doctor provides a non-medical service this would be liable to VAT. This includes medical reports (which are considered to be a form of consultancy) e.g. DNA test reports or reprographic reports.
Postage
Stamps/postage charges are exempt. This will normally arise where a department is recharging franking machine costs to a member of staff or an external body.
However, if you make a charge for postage which is connected with a supply of goods or services (e.g. posting a report as part of a consultancy service) then the postage charge will have the same liability as the goods or services provided.
Courier charges are VATable, unless the item is going outside the EC in which case they would be zero-rated.
Books and other printed matter
The supply of some printed items are zero-rated whilst others are standard rated. Since May 2020, electronic versions may also be zero-rated, with a small number of exceptions.
A list of some of the zero-rated items and standard items can be found here.
Lending charges (e.g. from a Library) for both printed and electronic zero-rated items are also zero-rated.
Food
There are a number of VAT rates applicable to the sale of food by the University. The underlying principle is that food (not catering) is zero-rated, but some foods, including ice cream, confectionary, non-alcoholic drinks and crisps are liable to VAT at 20%.
NB: Alcohol is always standard rated irrespective of whom it is sold to.
HM Revenue and Customs define catering as food consumed on the same premises at which it is sold, or hot takeaway food. Food that is provided as catering is standard-rated unless the catering is being provided to students.
Food or catering provided to students is exempt as a closely related supply to the education provided, see Supplies closely related to education. Students are anyone who is at the University for a course, seminar or similar, not just under or post grads.
Sandwiches sold for consumption off premises are not classed as catering and should be sold as zero-rated.
Temporary reduced rate of VAT for hospitality (food and soft drinks) until 31 March 2022See Reduced rate for more information |
Advertising
Advertising sold to another charity is zero-rated as long as the charity you are selling to provides a certificate to claim zero-rating. The certificate should look something like the one shown at Appendix D and must be retained as evidence to support the zero-rating. Sales of advertising to non-charitable organisations are standard rated.
Sales of medically exempt items (zero-rated)
Other universities buying goods from us may claim medical exemption provided that they meet all the conditions. To do so they need to:
- provide the University with a medical exemption certificate; and
- meet the conditions set out in the medical exemption purchasing section of this guide – see Medically Exempt Purchases
Although called 'exemption' for VAT purposes it is actually a zero-rating and the transaction needs to be entered into the Accounts Receivable module on CUFS with the tax code of ZR - Zero Rated
Please see section Medically Exempt Purchases for further information on what supplies are eligible for Medical Exemption. We have a responsibility as a supplier to make sure that goods are eligible for relief before accepting that the exemption certificate can be applied. If a department incorrectly accepts a certificate it will be liable to meet any additional liability.
Reduced-rate sales
Domestic fuel or power
Domestic fuel or power is supplied at the reduced rate of VAT. Reduced-rate VAT is a lower rate of VAT payable only on certain goods or services. The current rate for Reduced Rate VAT is 5%.
Contraceptive products
Contraceptive products are supplied at the reduced rate of VAT. Reduced-rate VAT is a lower rate of VAT payable only on certain goods or services. The current rate for Reduced Rate VAT is 5%.
Women's sanitary products
Women's sanitary products are supplied at the reduced rate of VAT. Reduced-rate VAT is a lower rate of VAT payable only on certain goods or services. The current rate for Reduced Rate VAT is 5%.
Temporary reduced rate of VAT for hospitality (food and soft drinks), holiday accommodation and attractions
The Chancellor announced at Budget 2021 that the temporary 5% reduced rate of VAT for certain supplies of hospitality, holiday accommodation and admissions to certain attractions will be extended until 30 September 2021. From 1 October 2021 the reduced rate for these supplies will be replaced by a new reduced rate of VAT of 12.5% which will remain in effect until 31 March 2022. This impacts supplies that the University makes of food and drink as well as entry to the Botanic Gardens. The VAT team will be in touch with those it knows are affected by the 5% rate later over the coming months to plan the changes needed to systems to accommodate the new 12.5% rate. If you think this may affect your activities, please do contact us on vatqueries@admin.cam.ac.uk
Other sales
Standard rate sales
Anything that doesn't fall into the categories of being outside the scope, exempt, zero-rate or reduced-rate is standard rated.
It is not possible to produce a list of all standard rated items as it is any goods or services which are not explicitly chargeable at another rate of tax. Below is a list of some of the more common standard rated goods or services that the University might be involved in.
| Catering | Is standard-rated except when provided direct to students, or for the attendees of a paid course, conference or seminar when they can be exempted (see Supplies closely related to education) |
| Alcohol and certain foods | Alcohol is always standard-rated, as is ice cream, confectionery, non-alcoholic drinks and crisps. |
| Private purchases | Private purchases are standard-rated unless the goods/services being brought have their own VAT relief, e.g. in the case of a staff member buying a book the VAT would be zero-rated as books are zero-rated. Goods cannot be sold 'medically exempt' to members of staff. |
| Stationery | Sales of stationery items are standard rated unless sold to students when they can be exempted as they are seen as closely related to the supply of education. |
| Photocopying | Sales of photocopying items are standard rated unless sold to students or for use on a course when they can be exempted as they are seen as closely related to the supply of education. |
| Advertising | Advertising is standard rated unless sold to another charitable organisation when it can be zero-rated. |
| Telephone charges | |
| Photographs | |
| Posters | |
| Videos | |
| Royalties (UK) | |
| Consultancy | |
| Second-hand equipment | |
| Supplies of staff | |
| Charges for using facilities (not room hire) |
If you are in any doubt as to which rate of tax should be used for your transaction then contact the University Tax Team..