VAT and higher education
This page explains VAT rules for charities and higher education institutions.
Overview
The University is defined as an ‘eligible body’ and therefore its supplies of education to its customers are treated as exempt from VAT. Its remaining supplies to customers are subject to VAT. This means that the University is ‘partially exempt’ and can only claim back some of the VAT it pays to suppliers.
In addition, the University is a registered charity and as such is eligible for relief from some VAT on the costs that it incurs.
The University is also part of a VAT group, along with ßÏßÏÊÓƵ Estates and Facilities LLP and a small subsidiary ßÏßÏÊÓƵ UH Ltd. VAT group status allows members of the group to invoice one another without charging VAT. Invoices raised to university subsidiaries that are not part of the VAT group are subject to VAT in the same way as any third party supplier.
Partial exemption and VAT Recovery
As the University makes both exempt and vatable supplies, this has an effect on the VAT it can recover on its costs. It can recover all the VAT paid on costs related directly to supplies that it makes to customers where VAT is charged, and none on the VAT charged on costs related to exempt supplies. This leaves a large number of costs which are not directly related to either exempt or vatable supplies. These are entitled to a percentage partial recovery of VAT incurred on costs. This percentage roughly corresponds to the total value of supplies on which VAT has been charged divided by the total value supplies (exempt and vatable).
Supplies of Education
Supplies of education provided by an eligible body, such as a university, are exempt from VAT. This covers tuition fees, which are the largest component of the University’s income. In addition, supplies that are considered “closely related” to the supply of education (such as student accommodation and catering) are also exempt from VAT.
VAT Reliefs available to charities
- Advertising. This includes all advertising, including staff recruitment. Suppliers will zero rate VAT on advertising to all charities, but may ask for confirmation of charitable status.
- Construction
- Drugs and Chemicals (medical or veterinary research). A charity engaged in medical or veterinary research can buy substances directly used for testing, or for mixing with other substances in the course of that research, at the zero rate.
- Medical and Scientific equipment. Charities that are eligible bodies (this includes the University) can buy certain equipment for their own use at the zero rate.
- Medicinal products. A charity engaged in the treatment or care of people or animals, or in medical or veterinary research, can buy medicinal products at the zero rate.