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Research Operations Office


Published on Tue, 21/04/2015 - 12:23

Update on the Removal of VAT Exemption for Research

We have previously issued advice about the withdrawal of the VAT exemption for research from 1 August 2013. Here, we provide an update on the latest position.

Overall position

As previously advised, it is worth remembering that there are only a very limited number of circumstances in which the University relied on the exemption. In most cases, other than commercially funded research, research is funded by way of a grant which is outside the scope of VAT rather than exempt. The only occasions on which exemption could potentially have been applied would be where the research is (1) commissioned from a government department or health authority and does not meet the conditions to be a grant and (2) where there is a sub-contract with another university which is not simply a transfer of grant.

Transitional arrangements for existing contracts.

HMRC have now confirmed that any contracts already in existence at the time of change (1 August 2013) will continue to benefit from the relief for the life of the contract provided that they are not subject to substantial changes. This means that there should be no issues to the current VAT treatment for contracts in place at 1 August 2013.

New contracts

A detailed review of existing research grants/contracts engaged in by the University showed that in most cases of government and charitable funded research, the correct treatment (even where there is a subcontract in place) is as a grant funded activity both where the University receives funding and where it passes it on. In only a very small number of cases there is a possibility of different interpretation. More detailed guidance will be issued on this in the next few weeks.

Please direct any queries to the University’s tax team, via Carolyn Paskins on 01223 (3)32230 or