The purpose of this Brief is to announce the publication of a consultation on the withdrawal of the VAT exemption for business supplies of research services between eligible bodies.
All suppliers of business research and those that commission research.
The UK has received notification from the European Commission that its exemption for business supplies of research between eligible bodies does not comply with European legislation. The UK has accepted that this is the case and plans to withdraw the exemption from 1 August 2013.
HMRC have discussed the impact of withdrawal with representative bodies but have been unable to ascertain from these discussions the full impact on those affected.
In these discussions HMRC were informed that the impact of the withdrawal will be minimal when compared to the totality of all research conducted in the UK. Our best estimate is that it is likely to affect less than one per cent by value of all research undertaken in the UK.
The purpose of the consultation therefore is to gather information that will allow HMRC to assess more accurately the impact of the withdrawal of the exemption and to see whether there are any possible options to mitigate that impact.
Eligible bodies are generally Government departments, schools, universities, charities and other public bodies. It is only supplies of research between these bodies that will be affected. All other research will maintain its current VAT liability.
The consultation document is available on the HMRC website from 20 December 2012 under the "What's New" section.
Issued 20 December 2012
