Purchasing - VAT Guidance

Transcription

1 Purchasing - VAT Guidance What is the correct VAT liability of my purchase? Firstly, you will need to consider whether VAT relief can be claimed by issuing a certificate to the supplier with the purchase order: - If the goods/services are to be used for a qualifying medical or veterinary purpose, the University may be able to claim VAT zero rating relief on their purchase (see page 2) - If the University is purchasing advertising services which result in an advertisement being placed in someone else s time or space, VAT zero rating relief may be claimed (see page 11) - If goods/services are to be purchased for the direct use of our students from another eligible body for an educational purpose, VAT exemption may be claimed (see page 13) - If the purchase relates to a new building or extension, or is in respect of disabled access or items to be made available to disabled people for their personal or domestic use, VAT relief may be available in very limited circumstances. Further information can be found in VAT Relief for DDA Related works to Residential and Other University Buildings. Please contact the VAT Section for further advice: James Gillen, Senior VAT Assistant tel or james.gillen@manchester.ac.uk If none of the above applies, it is likely that VAT relief cannot be claimed and you should refer to Annex A (page 14) Summary of Tax Codes for Requisitions. Please note, the different rates of VAT are referred to as either Tax Classifications or Tax Codes in Oracle R12 1

2 Claiming VAT Relief for a Medical/Veterinary Purpose To help you decide whether VAT relief may be claimed you will first need to know: - Whether the University is purchasing the goods/services for its own use i.e. are not being purchased for re-sale, and if so - What will the University actually be using them for? There are three medical zero rate reliefs: 1) The purchase of medical, scientific, computer, video, sterilising, laboratory and refrigeration equipment predominantly for use in medical or veterinary research, training, diagnosis, or treatment (for conditions see page 3) 2) The purchase of medicinal products and substances wholly for use in medical/veterinary research, treatment or care (for conditions see page 8) 3) The purchase of custom made computer programmes/licences to use software solely for the purposes of medical research, diagnosis or treatment (for conditions see page 9) Important points to be aware of when claiming medical zero rate reliefs: o If you are unsure whether VAT relief is applicable to your purchase, please do not hesitate to contact the VAT Section; James Gillen (Senior VAT Assistant) can be reached on tel or by james.gillen@manchester.ac.uk o To claim VAT relief, the University should issue a declaration to the supplier with the purchase order, either through Oracle or by filling in a manual declaration. If the purchase is being made via E-Marketplace, a composite declaration is included on the purchase order. o Specific conditions must be met in order to claim relief from a VAT charge; it is important to understand what these conditions are and that declarations are issued by the University only where it is legitimate to do so. If a declaration has been issued incorrectly, you should ask your supplier to issue a VAT only invoice to correct it. As with any VAT error, HM Revenue & Customs may also issue a financial penalty o Medical/veterinary research means original systematic investigation undertaken in order to gain knowledge and understanding of the treatment or palliation of a physical or mental abnormality in humans or animals i.e. research into human/animal disease and injury; it includes the use of existing knowledge and experimental development to produce new or substantially improved materials, devices, products and processes including design and 2

3 construction o Medical/veterinary training means professional vocational training which is limited to doctors, nurses, surgeons and other health professionals who are, or seek to be, listed on a statutory register o Medical/veterinary diagnosis is the identification of diseases and examination of systems o Medical/veterinary treatment includes the administration of medicines, physiotherapy and surgery o Very few services benefit from zero rating relief other than repair/maintenance of relevant goods, hire of gas cylinders and the purchase of software licences. o VAT relief is not applicable where items are to be purchased for resale e.g. to NHS organisations o Template declarations can be found on the Forms and Guidance page of the Finance Directorate Intranet 1) The purchase of medical, scientific, computer, video, sterilising, laboratory and refrigeration equipment predominantly for use in medical or veterinary research, training, diagnosis, or treatment Zero Rating Certificate: Purchase/importation by an eligible body of medical, scientific etc. equipment Oracle Tax Code: Zero med equip The University is able to benefit from VAT zero rating relief when it purchases (or hires) relevant goods which are predominantly for use in medical/veterinary research, training, diagnosis or treatment. Relevant goods constitute items of medical, scientific, computer, video, sterilising, laboratory, or refrigeration equipment. HMRC defines Equipment as articles designed for a specific purpose. They are usually durable, although certain disposable items such as syringes that are designed to be used once only, may still be equipment. The VAT relief applies irrespective of whether equipment is bought outright, leased or rented. a) Medical equipment This is equipment that has features or characteristics that identify it as having been designed for a medical (including dental), purpose or function, such as the diagnosis or treatment of patients. This covers a wide range of goods, from simple items like bandages and tongue depressors to complex machinery such as X-ray machines and scanners. 3

4 General use items used to equip a medical facility such as a television purchased for use in a hospital ward, are not medical equipment b) Scientific equipment This is equipment designed to perform a scientific function. This includes precision measuring equipment and analytical equipment such as thermometers, weighing machines and spectrometers. Equipment that is not designed to perform a scientific function, but merely works on a scientific principle, is not scientific equipment c) Computer equipment This includes computer hardware such as servers, screens, keyboards, and disks. It also includes normalised i.e. off the shelf computer programmes. Custom made programmes and licences to use programmes are services and not equipment, see page 10. Machinery or other equipment that is either operated by computer or has computerised components is not computer equipment d) Video equipment Covers video recording and playback equipment - digital cameras used primarily for recording purposes are still known as digital video camcorders and so qualify for relief. e) Sterilising equipment This includes autoclaves and other specialised equipment using steam or other high temperature processes. Microwave ovens and other cooking appliances do not qualify even when used to sterilise. Sterilising fluid is not equipment and does not qualify f) Laboratory equipment This is equipment designed for use in a laboratory such as test tubes and other laboratory glassware, Bunsen burners, fume cupboards, microtomes, cryostats, laboratory benches and specialised sinks and catchpots N.B. Ordinary cupboards, lockers, seats and other furniture are excluded together with other general purpose items g) Refrigeration equipment 4

5 This includes all cooling and freezing equipment whether or not of an industrial type, special design for specific purpose or the common domestic fridge etc. h) Resuscitation Training Models Resuscitation training models (resuscitation dummies) can be zero- rated if they include a head and torso designed only for use during first aid training in cardiopulmonary resuscitation and/or defibrillation techniques Parts and accessories VAT relief is available for parts and accessories to relevant goods. Parts are integral components without which the equipment is incomplete. Accessories mean optional extras that are not necessary for the equipment to operate in its normal course, but are used to: improve the operation of the equipment; or enable the equipment to be used, or used to better affect, in particular circumstances This would cover e.g. a printer for use with a computer, a specifically designed camera for use with a microscope, a rack for holding test tubes Items that are not parts or accessories are: items that have independent uses such as television sets accessories to accessories such as a filter for a camera which is itself an accessory to a microscope consumables such as ink cartridges, specialised paper and generic bulk substances such as liquids, powders, sheets, pellets, and granules Repair and maintenance of eligible goods VAT relief may be obtained for the repair or maintenance of eligible goods which are owned or possessed by the University. This includes work done under a maintenance contract or as a one-off repair; goods supplied in connection with such services are also included in the relief Installation costs If the normal selling price of goods which are eligible for relief contains an amount for installation, fixing or connection to mains services and/or testing equipment on site, zero rating will apply to the whole selling price i.e. including that element which relates 5

6 to installation or testing. However, where building works, such as the removal of walls or the reinforcing of floors are necessary in order to install large items of equipment, these works will be standard-rated, even when carried out by the supplier of the eligible equipment Examples of goods which may be eligible for VAT relief Advanced air filtration and ventilation system (ventilation/air handling unit that maintains pressure control in addition to regulating temperature Anaesthetic apparatus Aprons, lead lined for x-ray protection Autoclaves Bandages Barometers Bedpans Bedpan washers, with sterilising steam cycle Beds, highly specialised e.g. net suspension or medical water beds Bunsen burners Cadaver Freezer Store Cameras, video Digital cameras are still known as digital video camcorders or cameras and so still qualify Oct 13 Catheters Centrifuges Chilled store Condensers for cold rooms/roof chiller supplies Clamps medical Computers (including desktops, laptops and tablet devices). Computer hard drives, disks and tapes Computer keyboards Computer mouse Computer printers Computer screens Computer screen filters Computer servers Deep freezers Deep bowl stainless steel laboratory sinks Dental chairs Dental drills Dental mirrors Dental spittoons Drip poles Endoscopes Electro-cardiographs Embalming Table Eye test charts Eyewash Facility Safety station Examination couches, adjustable First aid kits - supplied as prepackaged units Forceps Fume cupboards Gloves, surgical Heart pacemakers Hypodermic needles Ice making machines ipad Tablet Computers Identification bracelets for patients Kidney bowls Laboratory benches Laboratory glassware Light boxes X-rays 6

7 Mattresses, specially designed for the relief/prevention of pressure sores Medical Compressed Air Installation Medical vacuum installation Medicine measures, graduated Microscopes Operating lights Patient trolleys and stretchers Physiotherapy equipment, specialised - other than gymnasium equipment Pillows, orthopaedic, specially designed and used for neck or spinal injuries Pipettes Printers Radiography equipment Renal dialysis units Resuscitation equipment Resuscitation dummies Scalpels Slop hopper (for medical waste) Sphygmomanometers Splints Stethoscopes Surgical gloves Surgical gowns Surgical masks Surgical pendants inc lighting equipment Suture needles Swabs Syringes Test tubes Thermometers, clinical Thermometers, other Tongue depressors Video cameras Video tapes Video players Video monitors Washing troughs e.g. in dissecting/anatomy skills lab Weighing machines Wound dressings X-ray films/plates X-ray machines - medical X-ray machines - other X-ray viewers Examples of goods which are not eligible for VAT relief Air conditioners (nonspecialised) Alarms, security or smoke Alarm bracelets Aprons, other Bedpan washers, other Blankets Cameras, still Catering equipment Cleaning equipment Closed circuit television systems Computer stationery Cotton wool Curtains Disinfectants Drugs trolleys Gas masks and protective hoods Gloves, other Gymnasium equipment Hearing aids Laboratory animals Lockers Nurse call systems Occupational therapy materials 7

8 Overbed tables Overhead projecting units Pagers Printer Cartridges Pillows, other Screens Stationery Sterilising solutions Tape recorders Television sets Towels Training dummies (nonresuscitation), skeletons, anatomage tables Uniforms Waste disposal bags, boxes, jars and sacks Waste disposal machinery 8

9 2) The purchase of medicinal products and substances used wholly in medical/veterinary research, treatment or care Zero Rating Certificate: Medicinal products and substances used in medical/veterinary research, purchased by a charity engaged in medical/veterinary research, treatment or care Oracle Tax Code: Zero med prod This relief does not cover purchases for use in medical/veterinary training The University is able to purchase medicinal products and substances which it will use wholly for medical/veterinary research, treatment or care a) Medicinal products A medicinal product is a substance presented as a medicine, or an ingredient for a medicine, capable of being administered to people or animals for a medicinal purpose. The zero rate covers medicinal products purchased for the purpose of testing the effectiveness of those products N.B. A medicinal purpose means: treating or preventing disease diagnosing disease or ascertaining the existence or degree of a physiological condition contraception inducing anaesthesia otherwise preventing or interfering with the normal operation of a physiological function, whether permanently or temporarily, and whether by terminating, reducing or postponing, or increasing or accelerating the operation of that function, or in any other way b) Drugs and chemicals The University can claim VAT relief when purchasing substances directly used for testing, or for mixing with other substances, in the course of medical or veterinary research N.B. A substance can be natural or artificial and can be in solid or liquid form or in the form of a gas or vapour. If the substance is purchased in the form of gas, the zero-rating will also apply to the cylinder rental 9

10 3) The purchase of custom made computer programmes/licences to use software solely for the purposes of medical research, diagnosis or treatment Zero Rating Certificate: Purchase by an eligible body of custom made computer programmes/licences to use software solely for the purposes of medical research, diagnosis or treatment Oracle Tax Code: Zero software This relief is narrower than that for Medical, Scientific etc. Equipment as the goods must be used solely for a qualifying purpose and those qualifying purposes do not include medical training nor any veterinary purpose The University is able to claim VAT zero rating on the purchase of custom made computer programmes and licences to use software which are solely for the purposes of medical research, diagnosis or treatment. N.B. VAT relief may be available for purchases of normalised or off the shelf computer programmes under the VAT relief for Purchases of medical, scientific, computer etc. equipment (see page 3) 10

11 Claiming VAT Relief for Advertising Services Zero Rating Certificate: Charity Advertising Oracle Code: Zero cert other Important points to be aware of when claiming VAT relief: o If you are unsure whether VAT relief is applicable to your purchase, please do not hesitate to contact the VAT Section: James Gillen (Senior VAT Assistant) can be reached on tel or by james.gillen@manchester.ac.uk o To claim VAT relief, the University should issue a declaration to the supplier with the purchase order; Oracle does not currently produce a declaration at the purchase order stage for the Charity Advertising relief and so a declaration has to be filled in manually o Specific conditions must be met in order to claim any relief from a VAT charge; it is important to understand what these conditions are and that declarations are issued by the University only where it is legitimate to do so o VAT relief is not applicable where items are to be purchased for resale e.g. to other HEI s o If a declaration has been issued incorrectly, you should ask your supplier to issue a VAT only invoice to correct it. As with any VAT error, HM Revenue & Customs may also issue a financial penalty o Template declarations can be found on the Forms and Guidance page of the Finance Directorate Intranet As the University has charitable status, it is able to benefit from VAT relief when purchasing advertising services. Advertisements should comply with the University s charitable objects and must be placed in someone else s time or space that uses a medium which communicates with the general public Advertisement although there is no statutory definition of advertisement HMRC considers it to be a notice made available to the public in any form with the purpose of making a message known, whether commercial or otherwise In someone else s time or space this includes an advert broadcast on regional TV or advertising space purchased in a national newspaper. Zero rating cannot be claimed for an advertisement to be placed on the University s website or in its own publications e.g. an undergraduate prospectus or in Unilife as these would not be placed in someone else s time or space. 11

12 Medium that communicates with the general public this includes all the conventional advertising media such as television, internet, cinema, billboards, the sides of vehicles, local newspaper etc. N.B. VAT relief is not available for direct mail advertising/market research as this involves selected individuals rather than the general public In addition, provided it is intended that the advertisement will be placed in someone else s time or space, the supply of design or production of the advertisement will also qualify for relief. This includes the design of a poster or the filming or recording of an advertisement to be broadcast. VAT relief is also available for pay-per-click charity advertising charged by search engines on sponsored links 12

13 Claiming VAT Relief when purchasing goods/services for UoM Students from another eligible body VAT Exemption Declaration: Declaration by the University of Manchester claiming VAT exemption for goods and/or services purchased for the direct use of its students from another eligible body Oracle Code: Exempt MU o The VAT Section should be contacted for guidance before this declaration is submitted to a supplier: James Gillen, Senior VAT Assistant, can be reached on tel or by james.gillen@manchester.ac.uk o The template declaration for this relief can be found on the Forms and Guidance page of the Finance Directorate Intranet The University of Manchester is an eligible body for VAT educational purposes. Where goods/services are supplied to the University by another eligible body e.g. another UK university, the supply may be exempt from a VAT charge so long as both the following apply: 1) The goods and services are closely related to the exempt education that is being provided by the University, and 2) The goods/services will be directly used by the students who are receiving the exempt education Eligible bodies for the purposes of the VAT (Education) Order 1994, include UK universities, fee paying schools, commercial providers who teach English as a foreign language (EFL), government departments, health authorities, local authorities making a business provision, other public bodies who perform functions similar to those of government departments or local authorities who act under an enactment or instrument for public purposes and not for their own profit, and other non-profit making bodies which are precluded from distributing and do not distribute any profits they make and who apply any profits which might arise from making supplies of education or vocational training to the continuance or improvement of those supplies. VS

14 Annex A - Summary of Tax Codes for Requisitions Purchase from a UK Supplier Tax Code VAT Description Rate Standard 20% Most goods and services purchased from UK suppliers e.g. hotel accommodation, office furniture, consultancy services, stationery, teaching equipment, catering, software licenses etc. Reduced 5% Certain safety products, domestic fuel and power Zero 0% Printed books, newspapers, public transport, certain food purchases but not confectionary, bottled drinks, alcohol or supplies of catering. Exempt 0% Education and training supplied by an eligible body, most services supplied by health professionals and many financial and insurance services Unregistered 0% Should be used when it is known that a UK supplier is not registered for VAT Out of Scope 0% Transactions which are not deemed to be supplies of goods or services for VAT purposes, e.g. requests for donations or receipt of grant funding, charges made to other members of the University's VAT group Purchase from a Supplier Based in Another EU Member State Tax Code VAT Description Rate Other EU 0% For purchasing goods/services from a supplier based in another EU member state. Please note, purchases may be subject to UK VAT via the VAT reverse charge procedure Outside EU 0% For purchasing goods/services from a supplier based outside of the EU. Please note, purchases may be subject to UK VAT via the VAT reverse charge procedure EU Member States Please use this link to check whether your supplier address is within another EU member state 14

15 Tax Codes to use When Claiming VAT Relief Tax Code VAT Rate Description Zero Med Equip 0% For claiming zero rating relief on medical, scientific etc equipment used for medical or veterinary research, training, diagnosis or treatment Zero Med Prod 0% For claiming zero rating relief on medicinal products and substances used for medical or veterinary research, diagnosis, treatment or care Zero Software 0% For claiming zero rating relief on custom made computer programs/licences to use software for the purposes of medical research, diagnosis or treatment Zero Cert Other 0% For claiming zero rating relief on a purchase using a template declaration not created via Oracle e.g. zero rating for charity advertising Exempt MU 0% For claiming VAT exemption on the purchase of goods/services for the direct use of University of Manchester students, from another 'eligible body'. How will I know which tax code to use? Check whether VAT relief can be claimed Check with the supplier or check the liability from a recent invoice for the same product. N.B. Certain products and services can have different VAT liabilities depending on different situations and this may be reflected in where they are being accounted for in the University s ledger e.g. the tax code for chemicals to be charged to a medical research project will be different to those purchased for undergraduate teaching. Use tax code Standard as a default for purchases from a UK supplier; if necessary, the liability can be amended once the invoice has been received. Contact the VAT Section in the Directorate of Finance for advice tel or speak to your School Accountant etc. 15