Changes to VAT law come into effect on 1 August 2013. They will affect charities (classed as ‘eligible bodies’ by HMRC), but the impact should be minimal on research.
We have blogged about this in the past, and HMRC have been working with us to clarify their guidance.
HMRC have now produced an information sheet explaining these changes and how they will be implemented.
What the changes mean
In summary:
- most research is out of scope for VAT
- collaborative research – carried out by more than one university or research institution that is not a business will be out of scope of VAT
- VAT arrangements for existing contracts (signed before 31 July 2013) for “business” research will continue – if it was 0% VAT it will continue to be 0%
- VAT on contracts for business research signed after 31 July 2013 will be 20%
What this means for charities
- VAT should not be added to any invoices for research grants, unless it was laid out in the grant application as a service being paid for – business supply
- VAT cannot be added to existing contracts where it was not previously incurred
- Charities need to be sure that when they are awarding grants they can know who the collaborating institutions are
For grants where collaborators are identified after the grant is awarded (i.e. some clinical studies) charities need to be clear that there is evidence of that is a true collaboration. This is most likely to happen in clinical trials where new investigators are added, and will be evidenced in the trial sponsor’s documentation.
