VAT codes for expenditure

The University is VAT registered and is legally obliged to account for VAT on its expenditure.  It is very important to correctly account for VAT on our expenditure as failure to do so can result in investigations by HM Revenue and Customs (HMRC) leading to potential penalties and damage to the University’s reputation.

The uBASE system is used to purchase goods and services.  Access to uBASE is restricted by profile to authorised users who have been trained to use the system.  The profile required to process a purchase requisition and create a purchase order, or to create a corporate card order or internal trade order, is ‘Orderer’.  Travel and subsistence expenses claims are processed through myJob.  More information on how to claim expenses can be found on the Expenses Webpages.

Every purchase must have a VAT code.  This code is referred to as a Tax Code in uBASE and is used by the Tax section each quarter to produce the VAT return which is submitted to HMRC.  The VAT code also helps the tax team to understand where VAT costs are being incurred across the University so that we can target our efforts in minimising these costs.

When VAT is charged on a purchase in the UK, that VAT may be claimed back by the University from HMRC dependent upon what the purchase is to be used for.  You can read more about the differences between recoverable, part- and non-recoverable VAT.  The University, as a charity, is also entitled to claim relief from VAT on some purchases of advertising and medical research.

If you are in any doubt about VAT for expenditure then please contact the Tax section for specific advice.

Purchases from other University departments

Tax Code Description and usage

XA

Internal trade purchasing – no VAT is applied to purchase order for this Tax Code.

Use this Tax Code for:

  • Internal Trade purchase of goods or services provided by one University department to another

Don’t use this Tax Code for:

  • purchases of goods or services from any external supplier
  • expenses claims
  • purchasing card expenditure

Notes:

VAT is never charged on Internal Trade.  You can also read more about Internal Trade at the University, including which ‘University companies’ are covered by Internal Trade and advice on when one department may need to pass on the VAT charged by an external supplier to another department.

Purchases from UK suppliers – 0% VAT

Tax Code Description and usage

M0

No VAT (zero-rated and exempt) – no VAT is applied to the purchase order or expenses claim for this Tax Code.

Use this Tax Code for:

  • purchases or expenses claims for goods or services from UK suppliers which are zero-rated. Examples of zero-rated purchases include:
    • books
    • newspapers
    • paper journals (not electronic journals)
    • leaflets
    • passenger transport (UK only)
    • room hire
    • attending academic conferences (UK only)
    • cold take-way food
    • courier costs for exporting goods outside the European Union
    • advertising for charities
  • purchases or expenses claims for goods or services from UK suppliers which are exempt from VAT. Examples of exempt purchases include:
    • insurance purchased from an external supplier (not Risk 2 Value or Insurance, Finance Department)
    • most financial services
    • education and training provided by schools, colleges and universities
    • postage provided by the Royal Mail
    • most healthcare services
  • purchases or expenses claims from small companies not registered for VAT

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any overseas suppliers
  • purchases or expenses claims for goods or services related to medical research
  • internal trade
  • purchases or expenses claims for goods or services related to activities qualifying to fully recover the VAT

Notes:

You can read more about how to use this Tax Code for each of the examples, including some advice on creating more complex purchases orders, in the A-Z of VAT terms, pitfalls and common mistakes.

M1

No VAT – medical research exemption – no VAT is applied to the purchase order or expenses claim for this Tax Code.

The University, as a charity, is entitled to claim relief from VAT on certain purchases of goods and, to a far lesser extent, services to be used in medical and veterinary research. You should not assume that the VAT relief applies to everything related to medical and veterinary research.

Use this Tax Code for:

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services not related to medical research
  • purchases or expenses claims for goods or services related to activities qualifying to fully recover the VAT

Notes:

Suppliers can only exempt these supplies from VAT if they have a declaration from the University that we are entitled to claim VAT relief.

The Tax Code M1 should be used on a purchase order for claiming VAT relief for purchases used in medical research. When the Tax Code M1 is used on a purchase order a declaration is printed as part of the purchase order. The declaration states that the purchase is for use in medical research and therefore VAT relief is claimed.

Some suppliers insist on a more explicit certificate. You can download a template; ‘VAT exemption for medical research equipment certificate’ or ‘VAT exemption for medical drugs and chemicals certificate’ from the A-Z of useful forms and codes. You will need to complete the certificate with supplier details, print a copy of your departmental headed paper and send it to your supplier. You will also need to send a copy of this certificate to suppliers for purchases where the purchases order is not physically sent to the supplier, eg on-line purchases.

Purchases from UK suppliers – 20% VAT

Tax Code Description and usage

M2

Standard rate VAT – fully recoverable – VAT at 20% is applied to the purchase order or expenses claim for this Tax Code.

When VAT is charged on a purchase in the UK, that VAT may be claimed back by the University from HM Revenue and Customs (HMRC) dependent upon what the purchase is to be used for.

VAT can only be fully recovered for purchases or expenses claims for goods or services from UK suppliers which are solely for ‘commercial’ activities. You can read more detailed information about fully recoverable VAT before making your purchase.

Use this Tax Code for:

  • purchases or expenses claims for goods or services from UK suppliers which are standard-rated AND fully recoverable.

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any overseas suppliers
  • purchases or expenses claims for goods or services related to medical research
  • purchases or expenses claims for goods or services which are zero-rated or exempt from VAT
  • internal trade

Notes:

You can read more about how to use this Tax Code for certain purchases, including some advice on creating more complex purchases orders, in the A-Z of VAT terms, pitfalls and common mistakes.

M3

Standard rate VAT – not recoverable – VAT at 20% is applied to the purchase order or expenses claim for this Tax Code.

When VAT is charged on a purchase in the UK, that VAT may be claimed back by the University from HM Revenue and Customs (HMRC) dependent upon what the purchase is to be used for.

VAT cannot be recovered for purchases or expenses claims for goods or services from UK suppliers which are solely for ‘non-commercial’ activities. You can read more detailed information about non-recoverable VAT before making your purchase.

Use this Tax Code for:

  • purchases or expenses claims for goods or services from UK suppliers which are standard-rated AND non-recoverable.

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any overseas suppliers
  • purchases or expenses claims for goods or services related to medical research
  • purchases or expenses claims for goods or services which are zero-rated or exempt from VAT
  • internal trade

Notes:

You can read more about how to use this Tax Code for certain purchases, including some advice on creating more complex purchases orders, in the A-Z of VAT terms, pitfalls and common mistakes.

M4

Standard rate VAT – partly recoverable – VAT at 20% is applied to the purchase order or expenses claim for this Tax Code.

When VAT is charged on a purchase in the UK, that VAT may be claimed back by the University from HM Revenue and Customs (HMRC) dependent upon what the purchase is to be used for.

VAT can be partly recovered for purchases or expenses claims for goods or services from UK suppliers which cannot be said to be used solely for either commercial or non-commercial activities. You can read more detailed information about partly recoverable VAT before making your purchase.

Use this Tax Code for:

  • purchases or expenses claims for goods or services from UK suppliers which are standard-rated AND partly recoverable.

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any overseas suppliers
  • purchases or expenses claims for goods or services related to medical research
  • purchases or expenses claims for goods or services which are zero-rated or exempt from VAT
  • internal trade

Notes:

You can read more about how to use this Tax Code for certain purchases, including some advice on creating more complex purchases orders, in the A-Z of VAT terms, pitfalls and common mistakes.

Purchases from UK suppliers – 5% VAT

Tax Code Description and usage

M6

Reduced rate VAT – fully recoverable – VAT at 5% is applied to the purchase order or expenses claim for this Tax Code.

Certain supplies are subject to VAT at a reduced rate of 5%. These limited supplies include ‘domestic’ fuel and power, such as electricity provided to accommodation blocks and similar buildings. The majority of these purchases are undertaken by the Department of Estates on behalf of the University.

When VAT is charged on a purchase in the UK, that VAT may be claimed back by the University from HM Revenue and Customs (HMRC) dependent upon what the purchase is to be used for.

VAT can only be fully recovered for purchases or expenses claims for goods or services from UK suppliers which are solely for ‘commercial’ activities. You can read more detailed information about fully recoverable VAT before making your purchase.

Use this Tax Code for:

  • purchases or expenses claims for goods or services from UK suppliers which are reduced-rated AND fully recoverable.

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any overseas suppliers
  • purchases or expenses claims for goods or services related to medical research
  • purchases or expenses claims for goods or services which are zero-rated or exempt from VAT
  • internal trade

Notes:

You can read more about how to use this Tax Code for certain purchases, including some advice on creating more complex purchases orders, in the A-Z of VAT terms, pitfalls and common mistakes.

M7

Reduced rate VAT – not recoverable – VAT at 5% is applied to the purchase order or expenses claim for this Tax Code.

Certain supplies are subject to VAT at a reduced rate of 5%. These limited supplies include ‘domestic’ fuel and power, such as electricity provided to accommodation blocks and similar buildings. The majority of these purchases are undertaken by the Department of Estates on behalf of the University.

When VAT is charged on a purchase in the UK, that VAT may be claimed back by the University from HM Revenue and Customs (HMRC) dependent upon what the purchase is to be used for.

VAT cannot be recovered for purchases or expenses claims for goods or services from UK suppliers which are solely for ‘non-commercial’ activities. You can read more detailed information about non-recoverable VAT before making your purchase.

Use this Tax Code for:

  • purchases or expenses claims for goods or services from UK suppliers which are reduced-rated AND not recoverable.

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any overseas suppliers
  • purchases or expenses claims for goods or services related to medical research
  • purchases or expenses claims for goods or services which are zero-rated or exempt from VAT
  • internal trade

Notes:

You can read more about how to use this Tax Code for certain purchases, including some advice on creating more complex purchases orders, in the A-Z of VAT terms, pitfalls and common mistakes.

M8

Reduced rate VAT – partly recoverable – VAT at 5% is applied to the purchase order or expenses claim for this Tax Code.

Certain supplies are subject to VAT at a reduced rate of 5%. These limited supplies include ‘domestic’ fuel and power, such as electricity provided to accommodation blocks and similar buildings. The majority of these purchases are undertaken by the Department of Estates on behalf of the University.

When VAT is charged on a purchase in the UK, that VAT may be claimed back by the University from HM Revenue and Customs (HMRC) dependent upon what the purchase is to be used for.

VAT can be partly recovered for purchases or expenses claims for goods or services from UK suppliers which cannot be said to be used solely for either commercial or non-commercial activities. You can read more detailed information about partly recoverable VAT before making your purchase.

Use this Tax Code for:

  • purchases or expenses claims for goods or services from UK suppliers which are reduced-rated AND partly recoverable.

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any overseas suppliers
  • purchases or expenses claims for goods or services related to medical research
  • purchases or expenses claims for goods or services which are zero-rated or exempt from VAT
  • internal trade

Notes:

You can read more about how to use this Tax Code for certain purchases, including some advice on creating more complex purchases orders, in the A-Z of VAT terms, pitfalls and common mistakes.

Purchases of GOODS from overseas suppliers

You can check if your supplier is a member state of the European Union (EU).

Tax Code Description and usage

R0

Purchases of goods from EU suppliers – no VAT– no VAT is applied to the purchase order or expenses claim for this Tax Code.

Use this Tax Code for:

Don’t use this Tax Code for:

R1

Purchase of qualifying goods from EU suppliers - No VAT – medical research exemption – no VAT is applied to the purchase order or expenses claim for this Tax Code.

The University, as a charity, is entitled to claim relief from VAT on certain purchases of goods and, to a far lesser extent, services to be used in medical and veterinary research.  You should not assume that the VAT relief applies to everything related to medical and veterinary research.

Use this Tax Code for:

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services not related to medical research
  • purchases or expenses claims for goods or services related to activities qualifying to fully recover the VAT

Notes: EU suppliers will not charge us local VAT if we provide our UK VAT number, but we have to self account for VAT.  However, where we would be able to buy the goods VAT free in the UK as they qualify and are being used for medical research we do not need to self charge the UK VAT.  This code has been introduced to help distinguish qualifying purchases from ordinary purchases, where R0 should be used.

R2

Purchases of goods from EU suppliers – fully recoverable – no VAT is applied to the purchase order or expenses claim for this Tax Code. However, VAT is added and posted to the VAT account by the University accounting system to be claimed from HMRC.

Use this Tax Code for:

  • purchases or expenses claims for goods from EU suppliers which would be subject to VAT if purchased in the UK AND FULLY RECOVERABLE as to be used solely for ‘commercial’ activities. You can read more detailed information about fully-recoverable VAT before making your purchase.

Don’t use this Tax Code for:

R3

Purchases of goods from EU suppliers – not recoverable – no VAT is applied to the purchase order or expenses claim for this Tax Code. However, VAT is added to the cost centre by the University accounting system.

Use this Tax Code for:

  • purchases or expenses claims for goods from EU suppliers which would be subject to VAT if purchased in the UK AND used solely for ‘non-commercial’ activities. You can read more detailed information about non-recoverable VAT before making your purchase.

Don’t use this Tax Code for:

R4

Purchases of goods from EU suppliers – partly recoverable – no VAT is applied to the purchase order or expenses claim for this Tax Code. However, VAT is added to the cost centre by the University accounting system.

Use this Tax Code for:

  • purchases or expenses claims for goods from EU suppliers which would be subject to VAT if purchased in the UK AND which cannot be said to be used solely for either commercial or non-commercial activities.  You can read more detailed information about non-recoverable VAT before making your purchase.

Don’t use this Tax Code for:

  • purchases or expenses claims for goods or services from any UK supplier
  • purchases of services from any overseas supplier
  • claims for expenses incurred overseas (outside the scope of VAT)

R9

Purchases of goods imported from suppliers outside the EU – no VAT is applied to the purchase order for this Tax Code.

You may also be charged Import VAT and/or Import Duty on goods purchased from outside the EU. You should contact the Tax section before using this Tax Code.

Use this Tax Code for:

  • purchases of goods from suppliers outside the EU which will be imported into the UK

Don’t use this Tax Code for:

Note:

You can read more detailed guidance about importing goods.

RA

Import VAT paid by freight agents on goods imported from suppliers outside the EU – no VAT is applied to the purchase order for this Tax Code.

You may be charged Import VAT and/or Import Duty on goods purchased from outside the EU. You should contact the Tax section before using this Tax Code.

Use this Tax Code for:

  • the VAT which is charged on imported goods

Don’t use this Tax Code for:

Note:

You can read more detailed guidance about importing goods.

Purchases of SERVICES from overseas suppliers

Purchases of certain types of services from overseas suppliers (anywhere in the world outside the UK) are treated as ‘supplied where the customer is based’; ie UK for the University, rather than the standard treatment which is ‘where the supplier is based’. The services covered are:

  • research services
  • staff secondments to the University
  • consultancy purchased by the University
  • electronic services purchased by the University (eg e-journals)
  • the purchase of any grant, right or license by the University (eg Intellectual Property (IP) licensing)

You should contact the Tax section before using these Tax Codes or making a purchase of any of these types of services.

Tax Code Description and usage

R5

Purchase of SERVICES from any supplier outside the UK – fully recoverable

You should contact the Tax section before using this Tax Code.

R6

Purchase of SERVICES from any supplier outside the UK – not recoverable

You should contact the Tax section before using this Tax Code.

R7

Purchase of SERVICES from any supplier outside the UK – partly recoverable

You should contact the Tax section before using this Tax Code.

Purchases outside the scope of VAT

Tax Code Description and usage

XX

Outside the scope of VAT – no VAT is applied to the purchase order or expenses claim for this Tax Code.

Use this Tax Code for:

  • claims for mileage expenses incurred (either in the UK or overseas)
  • claims for expenses incurred overseas, including:
  • accommodation costs (including hotel bills)
  • travel (tickets for air, rail, bus and tram travel)
  • taxi fares
  • car hire
  • car parking charges
  • mileage
  • hospitality costs (including meals)
  • training courses provided by any overseas organisation
  • conference fees for non-UK conferences
  • fines and late payment charges
  • prizes

Don’t use this Tax Code for:

  • purchases of goods or services where you do not know the VAT status
  • purchases of goods or services which are zero-rated or exempt from VAT
  • claims for expenses incurred in the UK (except mileage)
  • training courses or conference fees for UK events
  • purchases or expenses claims for goods or services related to medical research or advertising
  • internal trade
  • purchases or expenses claims for goods or services related to activities qualifying to fully recover the VAT
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Need help or more information?

Who to contact
If you need advice or guidance on any aspect of VAT then please contact the Tax section.