Innovate UK VAT policy
Innovate UK’s grants are not a payment for service, they are provided without expectation of any return to Innovate UK. The grant lies entirely outside the scope of VAT in the great majority of cases.
VAT must not be included within the budgets requested as part of an application.
Guidance on VAT in claims
As well as not charging VAT on the whole of a grant claim, knowledge bases may not include in their grant claims any ‘input’ VAT incurred on incidental expenditure such as capital equipment or consumables purchases, external training courses, or travel and subsistence expenses. Grant claims are to cover the net value of expenditure only.
Innovate UK will perform random checks to ensure that grant holders comply with this requirement.
Additionally, as the knowledge base is providing a service to the business they are working with, the business is liable to VAT on its contributions. VAT charged to the business can be reclaimed through their VAT return, providing they have taxable income. If the business is VAT exempt, they remain liable for the VAT element o the claim.
When the knowledge base cannot recover VAT on purchases from HMRC
VAT should only be recovered once from public funds. Academic participants can claim irrecoverable VAT from Innovate UK when incurred as part of their costs. Knowledge bases must explain why they are unable to recover VAT on any claims submitted to Innovate UK.
Disclaimer
The knowledge base and business involved in a KTP project are ultimately responsible for its own VAT compliance.
Retrospective claims are not accepted.