Changes to the standard rate of VAT
As you may be aware, the Government announced earlier this year that the standard rate of VAT will return to 20% from 4 January 2011. This has a number of implications for the University which I have summarised below:
Purchasing
Unlike most companies, the University cannot recover VAT in full therefore it is important that we try to take advantage of the current reduced VAT rate whilst it is still in effect and minimise the cost to the University. We would therefore recommend the following:
- Please ADVANCE PURCHASE where possible, any goods that you are aware will be required after 4 January 2011, in order to take full advantage of the current lower rate.
- Any purchase invoices dated on or after 4 January 2011 that relate to goods or services delivered or performed before 4 January 2011 should be charged at the rate of 17.5%. If the VAT has been charged at 20% in error then the invoice should be returned to the supplier with a request to re-issue with the correct VAT amount.
- POM invoices coming in directly to Accounts Payable will be reviewed and checked centrally to ensure that the correct VAT amount has been charged. In order to do this it is essential that the receipt date on APTOS is correct. Can all Schools & Units please ensure that this information is input correctly?
Continuous Supplies
If you receive a continuous supply of goods or services (i.e. with no specific/final performance or delivery date), the value of the supply received or performed before 4 January 2011 should be at the lower 17.5% rate. Examples of the types of services which may fall within this category are gas, electricity, construction type services and subscriptions.
SALES
Supplies of standard rated goods or services made in full to a customer before 4 January 2011 should be charged at the 17.5% VAT rate.
Supplies of standard rated goods or services made in full after 4 January 2011 must be charged at the higher 20% VAT rate.
- Sales Invoices which are to be charged at the lower 17.5% VAT must be processed on APTOS on or before 20th December 2010 -ACTION MAY BE REQUIRED TO GET THESE INVOICES COMPLETED AND PROCESSED ON TIME.
- Sales Invoices which are to be charged at the higher 20% VAT must be processed on APTOS on or after 4 January 2011.
Please also see summary flow-chart below for additional guidance.
Anti-forestalling legislation
The government has also introduced legislation to prevent businesses from entering into arrangements in order to take advantage of the lower rate of VAT for goods and services to be provided after 4 January 2011. The majority of the transactions which the University enters into will be unaffected by this legislation, however, you should be aware that it exists and when it may apply.
The legislation can apply in the following circumstances:
Sales
- Payments are received from connected parties or invoices issued in advance for supplies to be made in the future. (SRMU Ltd is a 'connected party' and within the University's VAT group, therefore, transactions with SMRU Ltd are unaffected.)
- The University provides or arranges funding for customers to enable them to pay in advance for goods or services to be supplied by the University in the future; or
The University issues a VAT invoice before 4 January 2011 that does not have to be paid for at least six months; or
The University receives a pre-payment or issues an advanced VAT invoice (i.e. before the supply has been made) in excess of £100,000 unless it would normally have done so in the ordinary course of business.
- The University supplies a right or option to receive goods or services free of charge or at a discount for future supplies.
Purchases
- The legislation may apply indirectly to purchases being made by the University where a pre-payment is made or advance invoice is received in excess of £100,000.
- Although it is the supplier's responsibility to charge and account for VAT, any VAT under accounted for by the supplier may be payable by the University where the price agreed is VAT-exclusive. If you are considering entering into such an arrangement and the value is in excess of £100,000, where possible and for purchases only, you should try to agree a VAT-inclusive price.
If you are concerned that the legislation may apply to any of the supplies that you make or receive and would like further guidance, please contact vatenquiries@st-andrews.ac.uk. Alternatively please contact Janette McKinnon on ext 2582.