Get the Corporation Tax right ... recording project income and expenditure
Tax relief only applies to University income from its charitable activities of teaching or publicly funded research. The University undertakes a range of fund-raising activities, including Services Rendered, Consultancy, Testing and Analytical Services, non academic conferences and external catering, which are not related to the University’s charitable activities and the income from these activities does not qualify for tax exemption.
The University must make an annual return of the financial results of all non-charitable activities to HM Revenue and Customs (HMRC). HMRC are entitled to audit the University at any time and failure to accurately report on non-charitable activities can result in investigations by HMRC leading to potential penalties and damage to the University’s reputation.
It is therefore essential that the financial results reported to HMRC are accurate and reflect both total income generated by these non-charitable activities, and the full cost of generating that income.
Guidance on the definitions of these activities, negotiation of contracts and setting up project codes to monitor and record the income and expenditure is available on:
Reporting to HMRC
The Tax section prepares the annual tax return and computations setting out the financial result of all reportable activities to submit to HMRC at the end of each financial year. The computations are based on the financial information held on uBASE and adjusted for information not coded to the projects; for example, data on overheads and salaries which is provided by other sections in the Finance Department.
How can you help?
If you are considering undertaking a new activity and you are uncertain whether it will be subject to corporation tax, please contact the Tax section before completing any documentation.
Once an activity is underway then the same principle applies to all income generating activity that is reportable to HMRC:
- all income and expenditure must be charged to your non-research project account (this ensures the surplus or loss reported to HMRC is a true reflection of the financial result of that activity and that we are neither reporting too high a surplus / profit nor too low a loss for tax purposes)
- all income must be credited to your project account
- all direct and indirect costs of generating the income should be charged to the your project account
- you should charge time spent by staff in generating the income by allocating salary costs to your project account
- agree a reasonable overhead for the activity to be charged to your project account
Need help or more information?
Who to contact
If you are in any doubt about whether income will be subject to Corporation Tax then contact the Tax section for advice and guidance.
Contact your faculty finance team or professional services finance team for queries on using a non-research project account or raising sales invoices.