FINANCE SERVICES VAT to Basics Roger Bennett Tax

FINANCE SERVICES VAT to Basics Roger Bennett Tax Function University of Exeter VAT@exeter. ac. uk

Rates of Tax • Standard Rate - 20% – Majority of goods and services • 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

• Income streams of the University: – Exempt – Taxable – Mixed use – Partial recovery – Research – Donations/Contributions Recovery of VAT depends on the income stream

Can we recover the Input VAT? - No • The charge is linked to education – Tuition fees – Short courses and workshops – Academic conferences – Hire of rooms to external organisations • Grant funded research project for public benefit, where a project will not generate taxable income

Can we recover the Input VAT? - Yes • Directly linked to services/projects where there is an intention to generate fully taxable income • Expenditure directly relating to funding from an International Body if a certificate has been supplied to fully recover VAT. An example of an International body could be the European Space Agency.

Can we recover the Input VAT? - only partially • Projects/services where the intention is to generate some taxable, exempt or non-business income, i. e. mixed use but not fully taxable income • Support services within Uo. E – HR/Finance/Campus Services

Uo. E VAT Zero Rating • Zero rating on some goods and services, as a charity – Advertising – Goods and services for medical or veterinary research, training, diagnosis or treatment • Medical Equipment • Computer • Medical Substances – for synthesis, or testing

Charitable VAT reliefs • Other reliefs for services at the reduced rate of VAT or Zero-rated: – Fuel & Power- qualifying use – Building work – qualifying use • New Build – construction – design and build • Annex to existing building – construction – design and build • Village Hall/Religious buildings – Improve access for disabled persons

Capital and Commercial Activity

Commercial Property • Supply is standard-rated when buying or selling freehold of a new, or partly completed, commercial building, unless it qualifies to be treated as a Transfer of Going Concern(TOGC) • A building is ‘new’ for 3 years from the date it is completed • Completion date is the date the certificate of practical completion is issued, or the date the building is fully occupied, whichever happens first

Areas to consider - capital • Construction of new Halls of Residence; • Qualify as dwellings – cluster flats, up to 12 – self contained – no use by other students of shared kitchen and other facilities – no planning restriction regarding disposals • Construction of relevant residential – up to 5% (time) allowed for non-student use

Areas to consider - capital • Conversion of commercial to residential – 5% VAT • Residential properties – Bringing them back into use as residential - empty for more than 2 years – 5% VAT

Option to Tax (electing to opt) • It is possible to choose to charge VAT on certain supplies of land that would ordinarily be exempt supplies, BUT not for supplies of residential or charitable land which are always exempt • An option can only be revoked after 20 years • An option to tax can be disapplied by HMRC under various anti-tax-avoidance provisions • If letting or selling land to persons who cannot recover VAT (eg, banks, charities), it is preferable to purchase the land without VAT – electing to charge VAT can therefore restrict marketability of property

Need Assistance or Advice? • Taxation Function – Roger Bennett (University Tax Manager) ext 5438 R. W. Bennett@exeter. ac. uk – Anna Gralia-Szucs (Assistant Tax Accountant) ext 3132 A. Gralia-Szucs@exeter. ac. uk – Liz Shillingford (Tax Accountant) ext 3098 E. E. Shillingford@exeter. ac. uk