VAT on Research Services

Section 199 Finance Act 2001 amended the First Schedule to the VAT Act, which deals with exempt supplies. The effect of the amendment is that from 1 September 2001 research carried out by educational bodies is no longer an entirely exempt activity, but, in certain circumstances, is subject to VAT. Where VAT applies, it is chargeable at the standard rate.

Following the Finance Act 2001 amendment, paragraph (ii) of the First Schedule to the VAT Act now exempts “school or university education ...including the supply of goods or services incidental thereto, other than the supply of research services”. Prior to the insertion of the words in italics, all research carried out by educational bodies was treated as exempt because it was regarded as incidental to their primary function of education. Therefore, such bodies did not charge VAT on any of their research activities and they were not entitled to deduct VAT on their inputs in relation to such activities.

An information leaflet explaining the types of research which now become taxable is now available on the Revenue website.