VAT costs of investment activity recoverable as overheads

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The University of Cambridge has won its appeal in the First-tier Tribunal to recover a proportion of the VAT costs it incurred on the management of its endowment fund.

The key points to note are: where an investment activity is not carried out for its own sake but to generate funds to benefit the wider activities of a business, the costs can be treated as ‘overheads’; in determining whether costs are overheads it is necessary to look at the purpose of the activity objectively, even where the activities are separate; VAT incurred on such overheads can be recovered to the extent it can be attributed to taxable activities of the business.

The university’s endowment fund contributes slightly more than three per cent of the overall income of the university each year and covers around six per cent of the university’s operational expenditure…

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