Detailed VAT Information
This page aims to give detailed information on VAT and how it affects the University
Rates of VAT
Currently there are three rates of VAT in the UK:
- Standard Rate at 20% (from 04/01/2011)
- Reduced Rate at 5%
- Zero Rate at 0%
Most goods and services are subject to VAT at the standard rate. Supplies that are exempt, or subject to the reduced rate and zero rate are specified in law.
Summary Listing of Items which are lower-rated supplies:
- Children’s car seats
- Domestic fuel or power
- Installation of energy saving materials
- Grant funded installation of security goods, gas supplies and heating equipment
- Residential renovations and alterations
- Residential conversions
- Women’s sanitary product
Zero-rated supplies are taxable supplies, but the rate of VAT is nil.
Group 1 - Food
Group2 - Sewerage services and water
Group 3 - Books, etc
Group 4 - Talking books for the blind and handicapped and wireless sets for the blind
Group 5 - Construction of buildings, etc
Group 6 - Protected buildings
Group 7 - International services
Group 8 - Transport
Group 9 - Caravans and houseboats
Group 10 - Gold
Group 11 - Bank notes
Group 12 - Drugs, medicines, aids for the handicapped, etc
Group 13 - Imports, exports, etc
Group 15 - Charities, etc
Group 16 – Clothing and footwear for children
No VAT is chargeable on an exempt supply, and input VAT cannot be recovered except as allowed under the partial exemption provisions.
Group 1 - Land
Group 2 - Insurance
Group 3 - Postal services
Group 4 - Betting, gaming and lotteries
Group 5 - Finance
Group 6 - Education
Group 7 - Health and welfare
Group 8 - Burial and cremation
Group 9 - Subscriptions to trade unions, professional and other interest bodies
Group 10 - Sport, sports competitions and physical education
Group 11 - Works of art, etc
Group 12 - Fund-raising events by charities and other qualifying bodies
Group 13 - Cultural services, etc
Group 14 - Supplies of goods where input tax cannot be recovered
Group 15 - Investment gold
Supplies 'outside the scope of VAT'
Supplies are ‘outside the scope of VAT’, when they are:
- made by someone who is not a taxable person
- made outside the UK (special rules of supply apply for certain international services)
- not made in the course of furtherance of business
Examples of supplies ‘outside the scope of VAT’ are as follows:
- All supplies from one unit within a VAT registration to another are outside the scope of VAT, i.e. internal charges within the University
- Supplier not registered for VAT
- Supplies not made in the EU
- Invalid document for reclaim of VAT
- Grants, donations, contributions where the giver receives no benefit
- Ex gratia payments, i.e. tips, gratuities and gift vouchers
- Statutory charges, i.e. MOT, Council Tax, Driving/TV licences
Differences between Zero-Rated and Exempt Supplies
Although both of these categories result in no VAT being applied to the supply, the consequence is very different between them.
Zero rating is a rate of VAT, albeit 0%, i.e. it constitutes a taxable supply. This in turn renders any supplier of zero rated goods, services liable to register for VAT. The advantage of VAT registration is that VAT can be reclaimed on costs.
However, a business making solely exempt supplies is not making taxable supplies, so cannot register for VAT. Consequently, all VAT incurred upon expenditure becomes an additional irrecoverable cost.
Where a supply could be either zero-rated or exempt, zero-rating takes priority.
VAT and Charities
Charities are non-profit distributing bodies established to advance education, advance religion, relieve poverty, sickness or infirmity or carry out certain other activities beneficial to the community.
There is no general exemption for charities from the VAT system. Only VAT registered charities can reclaim the VAT they are charged, subject to restrictions on the amount they can recover.
The University of Strathclyde is a charitable body, registered in Scotland, under registration number SC015263.
The University is an ‘eligible body’ for VAT purposes under Group 6 (Education) of Schedule 9, VAT Act 1994. As a result of its ‘eligibility’, supplies of education, research or vocational training by the University are exempt from VAT.
The University pays VAT on most of the goods and services it receives, but can only recover a small percentage of VAT, via partial exemption recovery rules.
Whilst there is no general exemption for charities from the VAT system, certain supplies made to charities are specifically relieved from VAT.
These supplies include:
- Some advertising services
- Certain sound recording equipment supplied to charities caring for the blind
- Certain sea rescue equipment
- Goods donated to charities for sale or export
- Certain construction services
- Certain supplies of donated medical and scientific goods
This list is not exhaustive.
Charities and Advertising VAT free
As a registered charity, the University qualifies for zero-rating provided the supply of advertisement is made by a third party. The relief covers all types of advertisements on any subject, including staff recruitment. Charities are expected to only place advertisements which comply with their charitable objects.
Charities can advertise VAT free in any medium which communicates with the public. This includes all the conventional advertising media such as television, cinema, billboards, the sides of vehicles, newspapers and printed publications. The important factor is whether the advertisement is placed on someone else’s time or space. If this is not, there will be no scope for zero-rating.
Direct mail and telesales do not qualify for relief, because they are not a supply of advertising time or space but are marketing and advertising addressed to selected individuals or groups.
An advertisement placed on a third party’s internet site also qualifies for zero-rating.
In order to obtain this relief, the University has to complete a declaration that the specific conditions for the claimed relief are fulfilled and issue this to the supplier with the order.
A downloadable version of the zero-rating certificate is provided here. Charity Advertising
Zero-Rating of Donated Medical and Scientific Equipment
A charity engaged in medical or veterinary research can purchase substances directly used for testing, or for mixing with other substances in the course of that research at the zero rate.
A ‘substance’ can be natural or artificial, and can be in solid or liquid form or in the form of a gas or vapour. If the substance is purchased in the form of gas, the zero-rating will also apply to the cylinder rental.
A charity engaged in the treatment or care of people or animals, or in medical or veterinary research, can purchase medicinal products at the zero rate.
A ‘medicinal product’ is a substance presented as a medicine, or an ingredient for a medicine, capable of being administered to people or animals for a medicinal purpose. The zero rate covers medicinal products purchased by a charity for the purpose of testing the efficiency of those products.
Examples of qualifying goods or services:
- Medical equipment - equipment that has features or characteristics that identify it as having been designed for a medical (including dental) purpose or function, such as the diagnosis or treatment of patients. e.g. bandages, x-ray machines, scanners
- Scientific equipment - equipment designed to perform a scientific function. This includes precision measuring equipment and analytical equipment such as thermometers, weighing machines and spectrometers
- Computer equipment and certain software - including computer hardware such as servers, screens, keyboards, and disks. Machinery or other equipment that is either operated by computer or has computerised components, is not computer equipment
- Video equipment - including video recording and playback equipment
- Sterilising equipment - including autoclaves and other specialised equipment using steam or other high temperature processes
- Laboratory equipment - including equipment that is designed for use in a laboratory, such as test tubes and other laboratory glassware; Bunsen burners; fume cupboards; microtomes; cryostats; laboratory benches; specialised sinks and catchpots
- Refrigeration equipment - including all cooling and freezing equipment, whether designed for industrial, domestic or any other purpose.
Further examples of goods and services that may be eligible for VAT relief can be found on the following link:
A downloadable version of the zero-rating certificate is provided. This may be completed and issued to the supplier for the relief. Medical Science - Equipment
The overriding condition with the above types of equipment is that it may only be zero-rated when it is purchased or hired mainly for medical or veterinary research, training, diagnosis or treatment.
If you are in doubt about whether you fulfil the conditions for zero-rating please contact Finance.
Definition of Education
The supply of education by the University is exempt from VAT.
‘Education’ is not defined in the legislation. HMRC regard education as meaning a course, class or lesson of instruction or study in any subject, whether or not normally taught in schools, colleges or universities and regardless of where and when it takes place.
- Educational seminars
- Conferences and symposia
- Holiday, sporting and recreational courses
Education also includes distance teaching and associated materials, providing the student is subject to assessment by the teaching institution.
If you make a separate charge for registration, this is part of your provision of education, and can be exempt from VAT.
Education doesn’t include admission to events such as:
- Sports meetings
Exemption also applies to the supply of any goods or services which are ‘closely related’ to an exempt supply by the University.
'Closely Related' to Supplies of Education
In general terms ‘closely related’ refers only to goods and services that are:
- For the use of pupil, student or trainee; and
- Necessary for delivering the education to that person
The University may treat as closely related any accommodation, catering, transport, school trips and field trips subject to certain conditions.
The supply of graduation services to affiliated students on completion of their degree course would typically consist of a presentation ceremony and the provision of degree certificates. This is a ‘closely related’ service to students and therefore exempt from VAT. However, charges to guests would be subject to VAT at 20%.
The University will not charge VAT on the closely related goods and services we provide direct to the pupils, students and trainees of other schools, colleges or universities that are also ‘eligible bodies’.
Supplies that are not 'Closely Related'
The following are examples of goods and services that are standard-rated, unless VAT relief is available elsewhere:
- Supplies to staff (including tutors on summer schools) and to other non-students
- Sales of goods from school shops, campus shops and student bars
- Sales from vending machines
- Sales of goods not needed for regular use in class
- Separately charged laundry and other personal services
- Sales of school uniforms and sports clothing
- Admission charges (other than for taking part in sports activities) for example, admission to plays, concerts, dances, sporting venues, exhibitions, museums and zoos
- Administration and management services
- Commission for allowing sales by outside organisations at an educational establishment
- Sales by a sole proprietor or partnership in connection with private tuition
Except for closely related supplies between eligible bodies, there’s no general exemption for goods and services supplied to providers of education, research and vocational training for use in their educational activities.
Definition of 'an Eligible Body'
The following are classed as an eligible body:
- School, University, sixth form college, tertiary college or further education college or other centrally funded higher or further education institution (defined as such under the Education Acts) or the governing body of one of these institutions
- Local authority
- Government department or executive agency
- Non-profit making body that carries out duties of an essentially public nature similar to those carried out by a local authority or government department
- Health authority
- Non-profit making organisation that meets certain conditions
- Commercial provider of tuition in English as a foreign language (EFL) - in which case, special rules apply.
Definition of 'Research'
The supply of research is exempt from VAT when it is supplied to another eligible body. The University must determine the status of the customer and, if not satisfied that the customer is an eligible body, VAT should be charged.
HMRC regard research as meaning ‘original investigation undertaken in order to gain knowledge and understanding’. It is the intention at the beginning of a project that determines whether a supply qualifies as research. If the intention is to advance knowledge and understanding, the supply is one of research.
The fact that a project may have a specific commercial application does not necessarily mean that it cannot also be research.
The following are examples of work which HMRC do not regard as being research:
- Consultancy and business efficiency advice
- Collection and recording statistics, without also collating, analysing or interpreting of them
- Market research and opinion polling
- Writing computer programmes
- Routine testing and analysis of materials, components or processes
Supplies of consultancy services by the University are business activities and are subject to VAT at the standard rate.
Research provided to recipients outside the UK is outside the scope of VAT. If a research iscarried out under ‘European Commission Framework 5 and 6 research programmes’, the research provider can recover input VAT that directly relates to this research.
However, HMRC has ruled that VAT on costs in EC Framework 7 projects is not recoverable, as the EC does not consider VAT an allowable cost. VAT incurred on EC Framework 7 projects will therefore not be reimbursed by the EC.
Paying VAT on EC Invoices
When purchasing Goods from EU (from the 1 Jan 2021) the process falls in line with the current process for purchasing goods from overseas. The invoice from the supplier won't contain VAT and should be processed using Tax Code PZ.
However VAT is still due to be paid at the port of entry and this can be done in two ways:
The courier uses Postponed VAT accounting and the VAT charge is declared to HMRC who will add this to our monthly postponed VAT Accounting statement. When Finance receive the statement they process this, where the sub-project has Tax system PR/NR they will charge VAT to the Department. If the sub-project is FR then there will be no VAT charge to the Department.
The courier will pay the VAT to HMRC on our behalf and then invoice us for the VAT and Duty if applicable. The invoice will be processed by Finance and as above where the sub-project has Tax system PR/NR they will charge VAT to the Department. If the sub-project is FR then there will be no VAT charge to the Department.
In order for the above the courier requires the following information from the University. You should provide the supplier/courier with our VAT registration number (GB261339762) and our EORI number (GB261339762000) as they will provide this to the Courier. We should ask them to instruct the courier to use Postponed VAT Accounting (PVA). If the courier gets in touch we should provide the above information and again confirm the use of PVA.
For invoices that relate to goods/services which will be used for the purposes of medical research, medical training, treatment or diagnosis, Tax Code PE should be selected. This will trigger a simplified version of the VAT Exemption (zero-rating) Certificate being sent to the supplier. When the Tax System says FR in the sub-project, please do not claim VAT exemption as VAT will be recovered in the normal route, i.e. via quarterly VAT return. Please note VAT exemption (zero-rating) is at the suppliers’ discretion. When the supplier clarifies the VAT charge is correct, the invoice should be paid in full.
Purchases of services from other EC member States are called 'EC Acquisitions'. Invoices relating to EC Acquisitions should not include VAT as charges for goods should be zero rated by the supplier, provided we give the supplier the University’s VAT registration number, GB261339762.
However, there is still an obligation to pay VAT on acquisitions where it is due. In FMS, this is done by selecting the correct Tax Code i.e. PA Purchases (Input) – EU Services – Reverse Charge. VAT will be either charged to the expenditure account code or the input VAT account code, depending on the set up of the Tax System associated with the sub-project. Finance will be responsible for collecting the reversed VAT and remitting the payment to HMRC in the quarterly VAT return.
Certain services the University receives from the EC Member States are also subject to ‘Reverse Charge of VAT’ procedures. The reverse charge works in a similar way to the EC Acquisition. The University must account for VAT due at the rate of VAT that the supply would attract if supplied in the UK, i.e. services of consultants, engineers, lawyers, accountants, data processing, the supply of staff, software, licence and other electronically supplied services, etc.
EC Member States
Currently there are twenty-seven member states of the European Community (EC):
|Irish Republic||IE||United Kingdom||GB|
VAT Charges on Electronically Supplied Services
An ‘electronically supplied service’ is one that:
- In the first instance is delivered over the internet or an electronic network, i.e. reliant on the internet or similar network for its provision; and then
- In the nature of the service in question is heavily dependent on information technology for its supply.
An ‘electronically supplied service’ includes:
- Digitised products, such as software and changes to or upgrades of software; or
- A service which provides, or supports a business or personal presence on an electronic network; or
- A service automatically generated from a computer, via the internet or an electronic network, in response to specific data input by the customers; or
- Services, which are automated and dependent on the internet or an electronic network for their provision
In all instances, electronically supplied services will be taxable at the standard rate, unless an exempting provision applies.
Particular care should be taken where a service includes both electronic and other elements. Such composite transactions must be considered on a case-by-case basis. Contact Finance if you require any further clarification.
VAT on Printed Matter
The relevant VAT legislation states that the supplies of the following printed matter are eligible for VAT zero-rating:
- Books, booklets, brochures, pamphlets and leaflets
- Newspapers, journals and periodicals
- Children’s picture books and painting books
- Music (printed, duplicated or manuscript)
- Maps, charts and topographical plans
- Covers, cases and other articles supplied with the above items and not separately accounted for
As a general rule, zero-rated items are those that convey information and are not for completion (e.g.Forms).
There are a number of conditions that must be satisfied for the printed matter to qualify as a book, leaflet or pamphlet. Generally these are:
- It must have several pages;
- It must be bound in a stiffer cover (book) or stapled (booklet)
- A brochure or pamphlet could be a single folded sheet
- A brochure or pamphlet must be designed to be held in the hand and read;
- No more than 25% of a brochure/pamphlet or leaflet must be for completion. It must have predominately text. Linked illustrations are acceptable
- A leaflet must not be printed on laminated paper or stiff paper. It should be complete in itself.
Included within the above are photocopies, typed or hand written works so long as the item is bound /stapled, and is a complete work in its own right.
To put this into the context of an educational establishment, the following items may be VAT zero-rated:
- Leaflets advertising courses
- Annual reports and published accounts
- Staff journals
- Newsletters and bulletins.
A printing business with a contract to supply VAT zero-rated printed matter may also VAT zero-rate any preparatory work or post production services charged to the same establishment, even if the printer has employed sub-contractors to perform some part of the production process.
However, a supplier can only VAT zero-rate preparatory or post production work when these services are supplied in conjunction with VAT zero-rated printed matter.
If the University sub-contracts any design, preparatory or post production work to a third party then this will be subject to VAT. It will be more tax efficient to ensure such work is contracted through the person providing the printed matter.
Import Duty Relief Certificate
All goods imported into the U.K. from countries outside the UK (from 1 Jan 2021) are subject to import duty and VAT at rates applicable. Customs Duty will not be applied on goods with a value less than £135 but duty is waived if the amount of duty calculated is less than £9 (HMRC Reference: Notice 143, April 2012).
Universities, polytechnics and similar educational establishments can get relief of duty on the following goods imported from overseas:
- Scientific instruments and apparatus used for non-profit-making scientific research or educational purposes
- Spare parts, components and accessories specifically for scientific instruments and apparatus which have been granted relief and
- Tools to be used for maintaining, checking, calibrating or repairing eligible instruments and apparatus
VAT relief can also be claimed, only if the goods are intended for use in medical or veterinary research, training, diagnosis or treatment.
To be able to obtain approval and claiming duty relief on these goods, application must be made in advance of importation to NIRU (National Import Reliefs Unit). A downloadable form is provided for completion; This can then be forwarded to: firstname.lastname@example.org or posted to the following address:
National Import Reliefs Unit
HM Revenue and Customs
Killyhevlin Industrial Estate
Tel: 028 6632 2298
Fax: 028 6632 4018
NIRU will issue you with a certificate, if your application is successful. A copy of the certificate should be forwarded to the import agent when the equipment arrives at the airport.
Adam Greer in Finance can be contacted at extension number 2781, or via email email@example.com, if assistance is needed to complete the application form.
VAT Certificates Available to Download
Before downloading and completing any of these certificates you should ensure you are eligible for the relief. If you are in any doubt about eligibility for the relief contact Finance: firstname.lastname@example.org
- Charity Advertising
- Medical Science - Equipment
- Goods Services - Disability
- Construction Services - Disability
- NIRU Certificate