Introduction to VAT

VAT is a complex area and this guide is not exhaustive.

The legislation regarding VAT for education differs from that relating to businesses and some of the guidance given here will only apply to Universities. Many VAT rules are subject to exceptions. If you have any specific queries with regards to VAT please contact the Taxation team in the first instance.

As an educational charity UCL is an 'Eligible Body' and is entitled to certain reliefs in respect of VAT.

Like any business, it must charge VAT, where applicable, on its income and pay VAT on many of its purchases. It must also submit quarterly VAT returns. VAT is a significant cost to the University because it can only recover a small proportion of the VAT it incurs.

The VAT guidance on this website has been written for staff working in the University and is regularly updated to reflect legislative changes. This information will help staff determine whether or not VAT should be charged on different types of income, how VAT will impact on expenditure related to different activities, and what reliefs are available.

VAT Training

The VAT team run regular training courses and are happy to visit departments to discuss particular topics or run bespoke training. Please contact the Head of Taxation for further details.

Rates of VAT

Currently there are three rates of VAT in the UK.

  1. Standard rate at 20% - most items are standard rated
  2. Reduced rate at 5% - e.g. domestic fuel and power
  3. Zero rate at 0% - e.g. books.

Certain items are exempt from VAT - e.g. education.

Certain items are outside the scope of VAT - e.g. Grants received, donations, statutory charges e.g. business rates.

Zero rating is a rate of VAT albeit at 0%, i.e. it constitutes a taxable supply and VAT incurred in making these supplies can be recovered.

Exempt supplies are not taxable supplies and VAT incurred in making these supplies cannot be recovered except as allowed by the partial exemption method.

An organisation making a mixture of taxable and exempt supplies e.g. UCL, is known as partially exempt and VAT is recoverable as follows:

  • VAT incurred on purchases relating entirely to the provision of taxable sales is fully recoverable.
  • VAT incurred on purchases relating entirely to the provision of exempt supplies cannot be recovered.
  • Where VAT is incurred on general expenses relating to the provision of taxable and exempt sales a proportion of the VAT can be recovered.