3. Principles and Policies

See also:

3.1 Payments principles

(a) Payments to individuals

Any payment that the University makes to an individual by reason of employment or in return for services provided may be assessable for income tax and / or National Insurance, unless a specific tax exemption exists.


Sources of Exemption from Income Tax on payments to Individuals:
  • Legislation - specific activities or payments are classed as exempt, e.g. approved mileage payments, scholarship payments, etc.


This document incorporates both of the above, as well as arrangements for those situations where a payment may be made that is taxable (e.g. payment in return for work, taxable benefits, etc.).


As a general principle, payments to individuals of any type should not be made or authorized unless either:
  • They are specifically described in this document; or
  • Advice and approval has been obtained in advance from the Head of Payroll.


HMRC has sweeping powers to investigate and, in the event of tax due not being deducted, the University will be required to make good the short-fall and pay a penalty based upon the value of underpaid tax.

Note: where taxable benefits are permitted it is important that budget holders fully understand the cost implications of the additional tax charge. Further guidance is provided in Appendix 4.

(b) Payments to suppliers or other corporate bodies

Most payments that the University makes to suppliers or other corporate bodies will be subject to UK VAT.

The University must account for VAT through reference to the activity to which costs and income relate. Activities may be fully taxable, zero-rated, exempt, outside the scope of VAT, or mixed. Costs associated with University activities may consequently be fully recoverable, not recoverable at all, or partially recoverable.

It is important, therefore, in dealing with supplier payments, that the correct VAT code is assigned to the payment instruction.

Payments to suppliers and other bodies should also be considered in the context of whether they support the University's charitable objectives, as this has an important bearing on Corporation Tax implications.

The University Tax webpages contain further information on both VAT and Corporation Tax within the University.