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UK Introduces VAT On Business Research Services

HM Revenue and Custom (HMRC) has released VAT information sheet 11/13, concerning transitional arrangements that will apply following the withdrawal of the VAT exemption for business research services between eligible bodies on August 1, 2013.

The UK is removing the exemption following a notification from the European Commission that the exemption for business supplies of research contravenes EU law. The withdrawal from August 1, 2013, will impact all written contracts entered into on or after that date.

For supplies of business research where the written contract was entered into before 1 August 2013, whether or not work has already commenced, the exemption will continue to apply to services within the scope of that contract.

This means that if the contract is extended or varied (whether or not the consideration payable is altered) on or after August 1, 2013, then payments for these new or changed supplies will be standard-rated.

Some minor variations will not affect the liability of the original contract, HMRC has clarified. This might include one or more of the following:

Changing the supplier of a sub-contracted service;
Changing the order the contract is performed in;
Minor changes to the delivery time of the contract and milestones (less than three months) providing there is no additional consideration.


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