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Research Funding X5 Tax Code Decision Tool

Determine if research funding is business or non-business, use indicators, consider economic reality, and choose correct X5 Tax Code. Save tool as evidence. Tool can also be used for collaborations. HMRC guidelines provided.

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Research Funding X5 Tax Code Decision Tool

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  1. Research Funding X5 Tax Code Decision Tool

  2. How to use the tool (1) The first step is to determine whether the research is “business” (commercial) i.e. there is a supply/benefit to the funder or “non-business” i.e. grant funding with no benefit to the funder The next two sections set out the main indicators for each scenario which should be ticked if present The more indicators there are from each section, the greater the evidence for a decision You must consider the “economic reality” not just the contractual terms (i.e. if the contract does not reflect what’s actually happening…). See the guidance note

  3. How to use the tool (2) Once you have decided whether the research is business (commercial) or non-business (non-commercial), use the flowchart to arrive at the correct X5 Tax Code The same indicators can be used to establish collaboration or third party sub-contract (see the guidance notes) Save the completed tool to evidence your decision If in doubt please contact the Tax department!

  4. Using this tool for Collaboration • HMRC accept that all research services provided by collaborating bodies are outside the scope of VAT if they are part of the original grant application or added later – this should be evidenced in writing • Please see the guidance for assistance or contact the tax department directly • The tax department will provide advice within 3 working days of full information being provided

  5. Flowchart Non-Business Business Yes Yes Will the funder fund irrecoverable VAT costs? Is the funder an Article 151 Body? X5 Tax code A X5 Tax code B Outside of scope non-business / Funded irrecoverable VAT VAT Zero Rate / Full Recovery No • No Yes Is the funder based in the UK? X5 Tax code C X5 Tax code E Outside of scope non-business / Non-funded Irrecoverable VAT VAT Standard / Full Recovery No X5 Tax code D Outside of scope Recovery / Full Recovery

  6. The purpose of this decision tool is to assist Research Services to assign projects to the correct tax code on X5

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