VAT the Basics Training 3 July 2012 2

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www.le.ac.uk

VAT to Basics

Departmental Finance Presentation

3 July 2012

www.le.ac.uk

Roger Bennett

University Tax Manager

FINANCE OFFICE



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



Rates of Tax

• Standard Rate - 20%

– Majority of goods and services

– Increased to 20% on 4th

Jan 2011• Reduced Rate - 5%

– Domestic fuel and power

– Children's car seats



• 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



UoL Zero Ratings

• Zero rating on some goods and services,

as a charity

– Advertising - suppliers may ask for acertificate to declare our charitable status:

contact the Tax Office if required

– Goods and services for medical or veterinary

research, training, diagnosis or treatment



VAT Exempt

• Some goods and services are exempt as it

is considered inappropriate to tax them

– Health– Education

– Financial Services



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



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



A Quick GuideIncome VAT code Expenditure VAT code

Outside the Scope Y6 T3

VATable Supply YS T2

Zero Rate Supply Y3 T2

Exempt Supply Y1 T3

EU Export Y4 (Goods)Y5 (Services)

T2

EU Import T4 (Fully recoverable)T5 (non recoverable)PT (part recoverable)

Mixed Use Purchase PS



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



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)



‘Education’ (Exempt)

• Tuition fees

• Short courses and workshops

• Academic conferences

• Hire of rooms to external organisations

• Medical diagnosis and treatment



Input Tax (Expenditure)

• VAT charged to us on purchase invoices -

we pay this to our suppliers

• The supplier invoice should clearlyidentify 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



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



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 apositive 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



• 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



• 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



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

(http://www.hmrc.gov.uk/charities/vat/charity-funded.htm)

or contact the Tax Office

http://www.hmrc.gov.uk/charities/vat/charity-funded.htm

















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 reversecharge 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



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 ratedtherefore we are not charging VAT.




Need Assistance or Advice?

• Taxation Section – Room 172, FJB

– Roger Bennett (University Tax Manager) ext 2475

[email protected]

– Raj Bhola (Assistant Tax Accountant) ext 2379 [email protected]

– Jos Puri (Direct Tax Accountant) ext 5182 [email protected]

• University Tax Office Website

– http://www.le.ac.uk/finance/infoforms/vat/taxhome.html

• HMRC website helpful for detailed VAT rules - use searchor look under ‘charities’ or ‘education’ section

– http://www.hmrc.gov.uk/

mailto:[email protected]



http://www.le.ac.uk/finance/infoforms/vat/taxhome.html


































Documents

VAT the Basics Training 3 July 2012 2