With effect from 1 August 2013 the UK has removed the exemption from value added tax (VAT) for business supplies of research between eligible bodies.  Business research for this purpose is defined as research that is provided in return for consideration. This will affect eligible bodies as defined by Group 6, Schedule 9 VAT Act 1994. Group 6 deals with the VAT exemption in respect of the supply of education, research or vocational training by eligible bodies.

The exemption for business supplies of research is removed in respect of new contracts concluded on or after 1 August and to any existing contracts that are extended or varied, or in respect of which the consideration is increased, after that date. Payments made under the revised contract under the new conditions will be treated as subject to the standard rate VAT.

This measure has been taken because the existing law was not compatible with European Union VAT law. For this reason the UK informed the European Commission that the exemption would be removed from 1 August 2013.