Departmental Finance Presentation

FINANCE OFFICE

3 July 2012

VAT to Basics
Roger Bennett University Tax Manager

www.le.ac.uk www.le.ac.uk

VAT the Basics

VAT - tax on final consumption 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

of

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 Childrens 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 a certificate 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 Guide
Income VAT code Outside the Scope VATable Supply Zero Rate Supply Exempt Supply EU Export Y6 YS Y3 Y1 Y4 (Goods) Y5 (Services) Expenditure VAT code T3 T2 T2 T3 T2

EU Import

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

PS

Mixed Use Purchase

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 clearly identify 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 nonrecoverable 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 a positive 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) sterilising refrigeration
- video - laboratory

Full

details

on

HMRC

website

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

or contact the Tax Office

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 reverse charge 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.
What VAT code do we use to raise the sales invoice?

We are supplying books. Books are zero rated therefore we are not charging VAT.
What VAT code do we use to raise the sales invoice?

Need Assistance or Advice?

Taxation Section Room 172, FJB
Roger Bennett (University Tax Manager) ext 2475 rb209@le.ac.uk Raj Bhola (Assistant Tax Accountant) ext 2379 rh109@le.ac.uk Jos Puri (Direct Tax Accountant) ext 5182 jp238@le.ac.uk

University Tax Office Website

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

HMRC website helpful for detailed VAT rules - use search or look under charities or education section
http://www.hmrc.gov.uk/