25th March 2015
10 Minutes with….Kate McLaughlin-Flynn
Kate is the Director of Finance and Resources at the University of Cumbria. She has extensive experience in the public sector, with previous roles at Cumbria County Council and the London Borough of Redbridge. Kate was part of the 'Outstanding Finance Team' awarded at the 2014 THELMAs.
To find out why she "loves it when a plan comes together”, and why financial sustainability is always at the top of her priorities, read the interview.
2015 Budget Update
R&D Expenditure Credit:
After much speculation in the HE sector, the Chancellor's Budget on 18th March did not include anything to prevent universities claiming the R&D Expenditure Credit ('RDEC'). Phew.
However, KPMG contacted HMRC after reviewing the Budget announcements on Budget day and have provided the following update:
"the HMRC official line on this topic is:
• Universities would be eligible to claim the RDEC, subject to meeting the normal requirements of the credit. The RDEC is a taxable, expenditure based credit that benefits a company whether or not it has a corporation tax liability and in this respect, there is nothing in the legislation that will prevent universities from claiming the RDEC.
• However, HMRC would like to make it clear that such claims were not in the original intention of the policy. There is a separate funding mechanism for universities in the form of research council funding and grants from the higher education funding bodies.
• Whilst claims of this nature are permissible, this was not the policy intention and is something that is being looked into further."
Diverted Profits Tax:
The Budget did include an announcement that the new Diverted Profits Tax ('DPT'), due to come into effect on 1 April 2015, will be subject to a review of the operation of the conditions under which a charge can arise, as well as consideration of specific exclusions. The DPT will affect payments between group entities where "an effective tax mismatch outcome" results from transactions or entities of "insufficient economic substance", which is currently widely defined. The tax will be levied at a penal rate of 25% to encourage groups to be transparent with HMRC and restructure their arrangements to avoid it.
The Charity Tax Group has been campaigning for the DPT legislation to include a specific exclusion for charities which could otherwise be inadvertently caught by this anti-avoidance legislation to the extent that, according to the CTG, "the use by charities of trading subsidiaries would no longer have been an option". The amended legislation will be published in the week commencing 23rd March, and CTG is confident that this will include a specific exemption for charities.
Devolved land & buildings taxes
Scotland: Land and Buildings Transaction Tax web portal
Revenue Scotland has set up an online portal for the Land and Buildings Transition Tax. This includes legislative and process guidance. In addition, Revenue Scotland’s website features guidance on the Scottish Landfill Tax and the Revenue Scotland and Tax Powers Act.
Wales: Stamp Duty Land Tax Consultation
The Welsh Government has published a consultation which sets out its proposals for a Land Transaction Tax to replace Stamp Duty Land Tax in Wales from April 2018. The deadline for responses is 6 May 2015.
This consultation covers a number of areas of interest to universities, including residential transactions, non-residential transactions, leases, reliefs and exemptions.
£400 million for UKRPIF
Last week’s budget yielded an additional £400 million for the UK Research Partnership Investment Fund (UKRPIF). HEFCE welcomed the announcement in a statement on its website, and highlighted how the fund encourages strategic partnerships between universities and other organisations, stimulates additional investment, and strengthens the contribution of research to economic growth. An initial £500 million fund has so far contributed £400 million to 27 projects running between 2014-16, attracting over £1 billion of investment from business and charities. The further £100 million of initial funding will shortly be allocated to projects for 2016-17.
The additional £400 million funding announced in the budget will be used to support larger-scale projects (up to a maximum of £50 million of public funding per project), attracting at least double that investment from private partners. HEFCE “continue to encourage bids that tackle fundamental questions in research and address the challenges that society faces”.
Madeleine Atkins, Chief Executive of HEFCE, said that “The additional funding for UKRPIF is excellent news… The funding offers a further opportunity to enhance the nation’s research infrastructure and further develop partnership work”. She also added that HEFCE “look forward to working with Government to develop the new proposals for postgraduate research funding.”
Further details of funding competitions will be announced later in the year. See more about the UKRPIF.
Scotland bids to reinstate post-study work visas
A working group in the Scottish Government has released a report this week stating that the post-study work visa should be reinstated in Scotland. In an article in the Times Higher Education, The Post Study Work Group is reported to have outlined that an “absolute minimum” of a 12-month post-study work visa should be available.
The article cites Pete Downes, convener of Universities Scotland and principal of the University of Dundee, as saying that the case to allow international students to work in Scotland was “overwhelming”. Downes is also reported to have described the UK’s current immigration policy as “anti-competitive” and “a deterrent to highly skilled students and staff” that is “hurting our universities”.
Humza Yousaf, the Scottish government’s minister for Europe and international development, said: “The report makes clear the benefits that our education institutions, communities and economy enjoyed when previous post-study work routes operated in Scotland, and the negative impact we’ve seen since they were closed by the UK government in 2012”. You cna read the full article on the Times Higher Education website.
In another related article in the THE the All Party Parliamentary Group on Migration is also reported to have attacked the UK government’s changes to post-study work visas.
Horizon 2020 VAT and delay to Trivial Benefits in Kind Exemption
Certain universities have been asked by EU auditors to produce evidence from HMRC that VAT incurred on Horizon 2020 projects cannot be recovered via their VAT returns. BUFDG has obtained a letter from HMRC confirming that this is the case, thus supporting claims for this VAT on Horizon 2020 grant claims from the EU.
(Please note that HMRC sent a revised version of this letter on 23rd March 2015, just changing 'European Union' to 'European Commission' in the fourth paragraph, so this is the most up to date version).
In other tax news, Parliament has decided not to legislate for the new exemption to income tax for trivial Benefits in Kind in Finance Bill 2015 and instead will legislate in a future Finance Bill. This will mean that the income tax exemption will not come into force from 6 April 2015 as previously advised. We are actually expecting two or three Finance Bills to be passed this year, due to the election timetable.
SORP self-help sessions - final details
The dates for the summer SORP self-help sessions have now been finalised. Lunch will be available from 1pm with the sessions starting at 2pm and running until approximately 4.30pm. Further details and booking links can be found below:
- Scotland – Monday 15th June at the University of Glasgow. Click here to book.
- North East – Tuesday 16th June at Teesside University. Click here to book.
- London – Thursday 18th June at Birkbeck, University of London. Click here to book.
- Wales – Thursday 25th June at Cardiff University. Click here to book.
- North West – Thursday 25th June at the University of Manchester. Click here to book.
- Midlands – Friday 3rd July at the University of Warwick. Click here to book.
- South West – Thursday 9th July at the University of Exeter. Click here to book.
If you have any questions, please contact the office.
Scheduled repayments vs cash today: selling the student loans book
When it comes to reducing the deficit, selling the student loans book is a clear candidate for raising cash, writes Andrew McGettigan in an explanatory article the London Review of Books. “Anyone graduating from 2015 onwards is likely to owe £27,000 in tuition fee loans and more for maintenance loans, plus whatever interest accrued on the loans while they were studying. The Institute for Fiscal Studies reckons that on average student borrowers will owe £44,035 at graduation”, he reports.
In 2010 total student loan debt owed by English students and graduates was about £30 billion, but that had reached £54.4 billion by 2014. McGettigan reports that: “Because of the ‘generous’ conditions on the loans, repayments won’t reach significant levels until the 2030s. If things continue as planned, the sum that graduates owe will peak in the 2040s at somewhere around £330 billion in today’s money: a sizeable asset.”
Also to consider is the shortfall between outlay and repayment, meaning that the government will continually need to borrow more to create new loans for a long time yet. Plans to sell the loan, or part of it, which were set up by the last Labour government and agreed by all of the three major political parties, have gradually dwindled, but George Osborne announced in the Autumn Statement that ‘progress continues’ on the planned sale. Selling could have an upside for HE, McGettigan reports, including an increase in the provision of funded undergraduate places, and more capital available for postgraduate loans.
It's quite a long article but a very interesting read. You can read it fulll on the London Review of Books website.
London / South East Tax Group Meeting and regional PEGs
The next meeting of the London and South East Universities Tax Group will take place on Thursday 21st May at Imperial College, London. Coffee is from 10am for a 10.30am start. The meeting should draw to a close around 3.30pm. Bookings can be made here. Please forward any agenda items to Chris Bridgeman. It's also not too late to book onto the Northern Tax Group meeting on the 31st March in York.
In addition, there is a full round of regional Payroll and Expenses Group meetings in April. All these events are free of charge, and details are below. Please note that due to high demand for the London area meetings, these will run on both the 20th (Embankment Place) and 30th April (Hays Lane). The Bristol event is the joint PEG and South West Tax Group meeting. PEG in the morning and Tax matters in the afternoon.
- Southampton (19th March)
- Bristol (27th March)
- London (20th April)
- Manchester (28th April)
- Birmingham – (29th April)
- London (30th April)
- Glasgow (30th April)
If you have any questions about these meetings, drop Gill an email.
The answers are out there
Lastly some website help - if you’re stuck for the answer to a question, then the BUFDG discussion boards allow you to look beyond the here and now. Every question that has ever been asked since the dawn of time (ish) is still stored and accessible. There’s a good chance that the question has been asked before, and that someone has replied to it.
There are two ways to find an answer. Firstly, you could use the search tool at the top of the page. Alternatively, you could click the area of interest that your question relates to (Tax, Procurement, etc), and then click on the ‘Archive’ tab.
If you get stuck or need any other information, ask Matt.