HM Revenue and Customs has acknowledged there is a lack of clarity around the removal of VAT exemptions for research supply, in an update to its previously published consultation on the issue.
In the December 2012 consulation document, HMRC said that from 1 August universities, government departments and charities would have to pay VAT on research they commission from each other. The UK’s exemption on VAT for such research has not complied with EU law since 2002 and the government agreed to scrap the exemption following a challenge from the European Commission in 2011.
The aim of the consultation was to assess what impact the withdrawal would have, but some university finance and research directors felt it was unclear what would and would not be affected. They were particularly concerned about the effect the changes would have on consortia grants.
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