Most goods/services being purchased by the University are likely to incur VAT at 20% of their cost. Exceptions to this would be, for example:
- where the goods/services are exempt from VAT
- where the supplier is not VAT registered
- where the goods are eligible for zero rating of VAT
- where the services are being provided outside the UK (which in itself has exclusions)
- when purchasing corporate hospitality and VAT cannot be re-claimed
Further details can be found below.
Handling of VAT for Purchases of Goods and Services
The way in which VAT is handled will depend upon either the location of the source of supply of the goods or the location in which the service is being performed (ie, UK, European Union or Rest of World). The coding of VAT on official orders (also known as 'input VAT') is explained further in Qfis VAT Coding on Procurement Orders which also gives examples of the scenarios detailed below.
If goods/services are being purchased from a supplier situated in the United Kingdom, and VAT is payable, then it will be payable directly to that supplier and will therefore be shown on the supplier's invoice.
European Union (non-UK) and Rest of World Suppliers
If goods or services are being purchased from a supplier outside the UK and VAT is payable, then, in most cases, it is not payable directly to the supplier and as such, should not be shown on the supplier's invoice. Instead, the University will make payment directly to HM Revenue & Customs in the UK. (Although the VAT calculation itself will not be shown on the purchase order, users must ensure that they have sufficient funds to cover it as the amount of VAT will be deducted automatically from the project which paid for the goods).
The exception to this rule is where services are being provided in the country in which the supplier is located, for example, the supply of a hotel room in France. The local rate will differ from country to country but should be accounted for in the amount of the payment, if the cost of the service is VATable under the rules of the supplier's country. This being the case, then the purchase price will be the gross total cost, ie, including the relevant amount of VAT. So, for example, a service costing £121 supplied in a country who's VAT rate is 21% will have VAT at £21 included in the charge for the service. As the VAT charged will not be UK VAT, it should not be extracted from the purchase price and the total cost - in this case £121 - must be accounted for. See Qfis VAT Coding on Procurement Orders for further examples.
Zero Rating of VAT
Certain items are zero rated of VAT, for example, books, transport (eg air travel) and advertising, where the organisation is a registered charity, like Queen's.
In addition, if purchasing equipment which is to be used for medical research, teaching, training, diagnosis or treatment, then it is possible to have the VAT zero rated. Certain consumables are also eligible for zero rated VAT, as are specific items of veterinary equipment.
Advice on whether goods are eligible for zero rating can be obtained from the Finance Tax Section (ext 3058/3073).
For VAT to be charged at 0%, the official purchase order for the goods must contain a relevant VAT zero-rating declaration. This declaration will be pre-printed on orders generated from Qfis when the order type 'Med/VAT Zero-rated' is chosen when printing off the order.
Although it essential that all orders for zero-rateable goods contain this declaration, it is particularly important with respect to orders being placed outside the UK as the supplier must include a copy with its delivery documentation to advise HM Revenue & Customs that no VAT is chargeable.