04 July 2019 
Andrea Marshall, Tax Specialist
Liz Maher OBE, Director - Centurion VAT & Education team
Whilst I know that after 35 years in VAT there’s no hope for me now, I must say I was really impressed but the numbers of delegates that joined Louise and I for this session – first up on the morning after the night before AND we were chatting Capital Goods!
I was also really chuffed to see Rup from UCL secure a coveted BUFDG ‘I ♥ UNI TAX’ mug from Amanda at the close of the conference for the sheer scale of the number of CGS items he has oversight of in his university – last count 188! Helps put things into perspective if you are thinking that the five or six items you have to manage are enough of a headache!
Safe to say that CGS items remain an area of interest from all perspectives - whether ours, the university’s or HMRC. The session highlighted that, for many, the challenges start with identifying what CGS items might be coming up in the Capital Estates team plans – an effective way we pick them up is through our regular VAT Management Meetings with Finance where we ensure that an Estates representative, preferably the Director, comes along for the first part. Comments about attention span will be ignored here.
Another useful tool to help managing CGS is the simple creation of an assets register on a spreadsheet with all the relevant data on cost, completion, use approach etc. to allow consistent and compliant management for the life of that asset for the CGS period.
We didn’t inflict too much technical detail in the session partly because of the timings but also that BUFDG have a practical CGS training event in the pipeline to enable a thorough walkthrough on implementation and management aspects – so do look out for that.
A key message from our experience on assets is the need to ensure we can accurately monitor ‘change of use’ aspects of it which will trigger adjustments to either the original zero-rating claim for the VAT treatment of the build, or the CGS VAT value each year. It can be a delicate balance to strike if a university makes an assumption on use, say for commercial purposes in year one, to support a more beneficial VAT recovery or non-business use to support a zero-rating calculation which then fails to materialise and triggers a change of use VAT charge on the zero rating or a Capital Goods Scheme adjustment on lower taxable commercial use. Managing expectations internally within the university is one aspect, but also being confident that taxable business use and/or qualifying non-business use for the zero-rating can be supported when HMRC review the claims.
If Relevant Charitable Purpose (RCP) use in a building reduces in the ten years from practical completion then a VAT charge will be triggered – it may be ok if this additional VAT cost can be related to some Taxable use in the building, perhaps Commercial Research, but if not it’ll likely be a sticking VAT cost. It should be noted that unlike the CGS changing use aspect where VAT adjustments can go up or down on the VAT element, in a ‘change of use’ triggered by zero-rating there is only an adjustment if the actual zero-rating goes down from that originally claimed on the issued Certificate. There is not an adjustment if the RCP use goes up.
The ‘how to monitor’ change in use relies on the same need for effective communication across university departments – curriculum changes, merges with FE colleges perhaps, new builds elsewhere which ripple an effect across existing buildings, are all aspects to watch out for. The final point we shared is that ‘change of use’ needs to be corrected - for purposes of the zero-rating treatment – at the point at which the change of use occurred and not as a part of the Annual CGS adjustment review at year end. Certainly, it’s our experience that this is a point that HMRC are increasing their interest in.
There you are, I’m off again delving into the VAT detail of things – when all Amanda asked me for was a ‘how was the session’ review! I admit it, there’s no hope for me now – better admit I’m a VAT bat. Just hope the session attendees found things of interest in here on the morning – if not there’s some very clever people out there that can sleep with their eyes open!
Slides from the session are on the website.
