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DEPARTMENTAL GUIDE TO THE ACCOUNTING AND VAT TREATMENT OF INCOME

This Guide sets out the ORACLE postings for most types of income and where to go for further assistance.

It makes a variety of important accounting and VAT distinctions, including how to separate non primary purpose activity (such as commercial trading)
from other activities. Sticking to the tree will reduce errors so avoid the need to credit and reinvoice. It will reduce the level of queries and most
importantly ringfence taxable activity outside the University.

        STEP 1               Identify what 'EVENT' is giving rise to the income using this sheet.
                             The blue boxes are hyperlinked to relevant 'NOTES' numbered in brackets. Click the boxes!
        STEP 2               Once the 'EVENT' has been established, follow the path to find out the ORACLE POSTING TREATMENT.
        STEP 3               Use the 'INCOME DECISION TREE' sheet to code an invoice for any other activity.
        STEP 4               It will also need a reasonable apportionment of costs to all non primary purpose activities.




                                                                                                               ORACLE POSTING

                                                                                                        A/R Source   A/R
  What is the EVENT?                                                                      Coding (i)                               A/R Line Item (iv)      A/R VAT (v)
                                                                                                            (ii)   Type (iii)




                                                    Yes
                                                                                                         Send to Cashiers
 A RECEIPT paying for a
                                                                                                        Office to post, per the                           See AR VAT Decision
sales invoice or misc cash   Note (0)                                                    Do not code                                                             Tree
                                                                                                         Cash and Banking
         received
                                                                                                               process.

               No



                                                    Yes                                                  Send to Cashiers
                                                                                                        Office to post, per the
     A DONATION              Note (1)                                                    Do not code                                                             DG
                                                                                                         Cash and Banking
                                                                                                               process.

               No



                                                    Yes
                                                                                                         Contact Research
 A RESEARCH GRANT            Note (2)                                                   Grants Module                                                        Per RPF1
                                                                                                             Services

                                                    Yes
                                                                                                           Use the Capital
  A CAPITAL GRANT            Note (2)                                                   Project Codes                                                        Per PEA
                                                                                                           Projects Guide

                                                    Yes
   A GRANT for other                                                                                       Use the Capital                                See AR VAT Decision
                             Note (2)                                                   Project Codes                                                            Tree
       purposes                                                                                            Projects Guide


               No



                                                                                                        Interfaced
                                                    Yes                                  Use Natural                              Select Item (to match
  An inter-departmental                                                                                  via Sales     Invoice
                             Note (3)                                                   Account 48210                               Supplier Item on             XX
    sale of Inventory                                                                                      Order      Internal
                                                                                          Activity 28    Mngmnt                       Internal P.O.)
                                                                                                          Manual
    Any other inter-                                Yes                                  Use Natural                              Select Item (to match
                                                                                                           Sales       Invoice
  departmental sale or       Note (3)                                                   Account 48210                               Supplier Item on             XX
                                                                                                          Invoice     Internal
   recharge of costs                                                                      Activity 28                                 Internal P.O.)
                                                                                                            (AR)

              No


                                                    Yes

 A SALES INVOICE for
                                                                                                        SEE INCOME DECISION TREE
    any other activity




                                                                           Event
                                                                                                                                2b2318e4-6bc2-49dc-9411-f4a0722a2715.xls




                                                                                                                                              ORACLE POSTING
                                                                                                                                                   A/R Type
                   SALES INVOICE                                                                            Coding (i)          A/R Source (ii)             A/R Line Item (iv)          A/R VAT (v)
                                                                                                                                                      (iii)




                                                                                                                                                                 Can use Item or
               Is the activity directly                              Yes                                                                            Invoice
                                                                                          Primary      Use Natural Account          Invoice                        Description
Note (4)    associated with the education                                                                                                             Non                                   EE
                                                                                          Purpose            49630                Non Trading                     (Description is
                    of students?                                                                                                                    Trading
                                                                                                                                                                     better)

                                 No


                                                                                                                                                                 Can use Item or
               Is the activity indirectly                             Yes                                                                           Invoice                                              Click here for
                                                                                          Primary      Use Natural Account          Invoice                        Description        **See AR VAT
Note (5)    associated with the education                                                                                                             Non                                                   AR VAT
                                                                                          Purpose            49630                Non Trading                     (Description is     Decision Tree      Decision Tree
                      of students                                                                                                                   Trading
                                                                                                                                                                     better)

                                 No




                                              Yes
                                                      Is the conference or         Yes
                                                    course ''primary purpose''                         Use Natural Account                          Invoice
            Is the activity a conference or                                               Primary                                   Invoice                          Select
Note (6)                                                 or ''non-primary                                48240, Activity 40                           Non                                   EE
                       a course?                                                          Purpose                                 Non Trading                      Description
                                                    purpose"? (Refer to note                            (overtype default)                          Trading
                                                                 6)


                                                                                                                                                                                                            Yes                 TT

                                                                                                       Use Natural Account
                                                                                                                                                                                     Is the conference
                                                                                         Non-primary     48245 (overtype            Invoice         Invoice          Select
                                                                                                                                                                                      or course being
                                                                                          purpose*     default natural code         Trading         Trading        Description
                                                                            No                                                                                                        held in the UK?
                                                                                                       ONLY),     Activity 25
                                No
                                                                                                                                                                                                            No                  XX



                                                                                                                                                                                                            Yes                 TH

                                                                                                       Use Natural Account
                                                                      Yes                                                                                                             Is the customer
                                                                                         Non-primary     48220 (overtype            Invoice         Invoice          Select
Note (7)      Is the activity consultancy?                                                                                                                                           based outside the                                                    TT
                                                                                          purpose*     default natural code         Trading         Trading        Description                                                              UK
                                                                                                                                                                                            EU?
                                                                                                       ONLY),     Activity 25
                                                                                                                                                                                                                          Is the customer
                                                                                                                                                                                                           No               based in the
                                                                                                                                                                                                                                                                              TH
                                                                                                                                                                                                                           EU (but not in                               Yes

                                                                                                                                                                                                                              the UK)?

                                No
                                                                                                                                                                                                                                                   Has the customer
                                                                                                                                                                                                                                            Non    provided their EU
                                                                                                                                                                                                                                                     VAT number?


                                                                                                                                                                                                                                                                        No    TT
                                No
                                                                     Yes
            Is the activity non-student
Note (8)
            lettings or use of other                                                     Non-primary   Use Natural Account          Invoice         Invoice          Select           **See AR VAT
            premises and facilities by 3rd                                                purpose*      49560, Activity 25          Trading         Trading        Description        Decision Tree
            parties


                                No
                                                                                                                                                                                                                                XX
                                                                                                                                                                                                            Yes

                                                                                                                                                                                       Are the funds
              Is the activity a sharing of                          Yes                                                                                          Unless recharging      received on
                                                                                                                                                     Claim
             costs with an outside body -                                                              Use Natural Account         Claim Non                      stock items at       behalf of 3rd
Note (9)                                                                                                                                             Non
                i.e. Oxford is providing                                                                99600; Activity 36         Research                         cost, select        parties and
                                                                                                                                                   Research
                  paymaster services?                                                                                                                              Description         disbursed to
                                                                                                                                                                                           them
                                                                                                                                                                                                                           Contact Tax
                                                                                                                                                                                                            No
                                                                                                                                                                                                                              team to
                                                                                                                                                                                                                           discuss VAT
                                 No
                                                                                                                                                                                                                                code


                                                                                                                                                                                                                                TH
                                                                                                                                                                                                            Yes

                                                                    Yes
                 Is the activity a staff                                                                                                                                              Is the customer
                                                                                         Non-primary   Use Natural Account          Invoice -       Invoice          Select
Note (10)     secondment to an outside                                                                                                                                               based outside the                                                    TT
                                                                                          purpose*      48210, Activity 25           Trading        Trading        Description
                         body?                                                                                                                                                              EU?                                             UK


                                                                                                                                                                                                                          Is the customer
                                                                                                                                                                                                            No              based in the
                                                                                                                                                                                                                                                                              TH
                                                                                                                                                                                                                           EU (but not in
                                                                                                                                                                                                                              the UK)?                                 Yes




                                No                                                                                                                                                                                                          Non-
                                                                                                                                                                                                                                                   Has the customer
                                                                                                                                                                                                                                             UK    provided their EU
                                                                                                                                                                                                                                                     VAT number?

                                                                                                                                                                                                                                                                        No
                                                                                                                                                                                                                                                                              TT
                                                    All University publishing is
                                                    done as per objects of the
                                              Yes
                                                       University (to advance                                                                       Invoice
                                                                                          Primary      Use Natural Account          Invoice                          Select
Note (11)      Is the activity publishing?           learning by teaching and                                                                         Non                                   TO
                                                                                          Purpose       48210, Activity 10        Non Trading                      Description
                                                          research and its                                                                          Trading
                                                        dissemination to the
                                                              pubic).




                                                                                                                                                                 Can use Item or
                Is the activity a sale of                            Yes
                                                                                                                                                                                                         Click here for
                                                                                         Non-primary   Use Natural Account         Order            Invoice        Description        **See AR VAT
Note (12)   inventory to an outside body or                                                                                                                                                                 AR VAT
                                                                                          purpose*      48210, Activity 25       Management         Trading       (Description is     Decision Tree      Decision Tree
                 to the general public
                                                                                                                                                                     better)

                                No



                                                                                                                                                                 Can use Item or
            Is the activity some other sale                         Yes                                                                                                                                  Click here for
                                                                                         Non-primary   Use Natural Account          Invoice         Invoice        Description        **See AR VAT
Note (13)    or service to an outside body                                                                                                                                                                  AR VAT
                                                                                          purpose*      48210, Activity 25          Trading         Trading       (Description is     Decision Tree      Decision Tree
             or to the general public? (13)
                                                                                                                                                                     better)
                                 No
                                                    *NB: If the activity is NON-PRIMARY purpose, costs must be apportioned. See note 14


             Ask Finance for guidance               ** The AR VAT DECISION TREE can be found at: www.admin.ox.ac.uk/finance/oxonly/tax/vat




                                                                                                                                          Income Decision Tree
                                                                                  2b2318e4-6bc2-49dc-9411-f4a0722a2715.xls

NOTES TO THE ACTIVITY TREE

Definition of Primary Purpose (PP) activity of Non Primary Purpose (NPP)

A PP 'activity' is one of receipts and/or expenses that are furthering the charitable objects of the University.
Statute I of the Statutes regulating the University, Paragraph 3 provides:
                              “The principal objects of the University are the advancement of learning by teaching and research and its dissemination by every means.”
A primary purpose activity must:
        a) have a charitable purpose. 'Advancement of education' is a charitable purpose set out in the Charities Act.
        b) be for public benefit. This means that

                                             ▪ there must be an identifiable benefit;
                                             ▪ benefit must be to the public, or a section of the public;
                                             ▪ people on low incomes must be able to benefit; and
                                             ▪ any private benefit must be incidental.


The accounting treatment for the University must distinguish PP activities from NPP.

          Examples of PP Activities          Examples of NPP Activities
          ▪ Activities that are directly     ▪ Activities that are aimed at a limited sector of the public
          associated with students e.g.      e.g. a business conference or course held for a private
          teaching and research              organisation

          ▪ Activities that are indirectly   ▪ Activities that are not ''charitable'' as defined by the
           associated with the education     Charities Act 2006. e.g., where the aim is to make
          of students e.g. catering and      financial gain
          accommodation

How to account for NPP activities
The University uses a subsidiary company to account for general trading and other NPP activities, Oxford Trading Ltd. Activity 25 is used as the flag to distinguish these transactions within ORACLE,
although sales invoices coded to activity 25 will appear identical to other University invoices. This is because the University has an 'undisclosed agency' agreement with Oxford Trading Ltd,
which allows sales to be made in the name of the Department/University. So all NPP income, direct expenses and journals for NPP activities should be coded to Activity 25.

Definition of ''Educational''
The advancement of education which benefits a wide section of the public.

   Ref    Subject                            Description                                                     Examples

    0)    Receipt                            Either payment of an invoice or miscellaneous cash              Receipts of this kind need to go to cashiers to post.
                                             received.                                                       Refer to banking process at http://www.admin.ox.ac.uk/finance/cashmanagement/cashbanking/

    1)    Donation                           A donation is a gift given to the University for                Example:
                                             charitable purposes and free of any encumbrance.                ▪ Specific donations
                                                                                                             ▪ Non-specific donations
                                                                                                             Donations need to go to cashiers to post.
                                                                                                             Refer to banking process at http://www.admin.ox.ac.uk/finance/cashmanagement/cashbanking/

    2)    Research Grant                     A Grant given for research purposes.                            Refer to www.admin.ox.ac.uk/rso/oxonly/faqs/general_faq on how to contact Research Services

          Capital Grant                      A Grant given for capital construction.
                                                                                                             Refer to the Capital Projects Guide at www.admin.ox.ac.uk/finance/planning_reporting/capital/set-up

          Other Grant                        A Grant given for non-research purposes.
                                             e.g. equipment                                                  Refer to the Capital Projects Guide at www.admin.ox.ac.uk/finance/planning_reporting/capital/set-up

    3)    Sale of Inventory                  The sale of inventory to staff and students.                    Example:
                                                                                                             ▪ Sale of materials such as stationary to staff and students

    4)    Is the activity directly           These activities are the core activities of the university      These include:
          associated with students?                                                                          ▪ education
                                                                                                             ▪ teaching staff
                                                                                                             ▪ teaching facilities

   5)     Is the activity indirectly         These activities are incidental to those that are directly      Provision of services to students and staff being taught by the university, such as:
          associated with students?          associated with students.                                       ▪ catering
                                             They are activities that wouldn't exist but for the             ▪ accommodation
                                             students.                                                       ▪ vending machines
                                                                                                             ▪ car parking in support of educational activities
                                                                                                             ▪ photocopying
                                                                                                             ▪ internet facilities
                                                                                                             ▪ provision of places at a creche for children of our students in return for payment
                                                                                                             ▪ Income generated by the university as commission from service providers in delivering services to
                                                                                                             students. e.g. Use of cash machines

   6)     Is the activity a conference       A conference is an organised formal meeting for a       Examples of ''primary purpose'' conferences and courses
          or a course?                       number of people for discussion and consultation.       ▪ Conferences or courses run by the university where the focus is on education and research topics
                                                                                                     and the sharing of knowledge
                                             A course is an organised meeting for a number of people ▪ Conferences or courses for students, researchers, post graduates or university staff.
                                             to learn about a specific subject or topic.             ▪ University academic conferences/courses
                                                                                                     ▪ A conference or course held by a third party education provider e.g. The Open University or other
                                                                                                     charitable organisation

                                                                                                             Examples of ''non-primary purpose'' conferences and course
                                                                                                             A 'closed' course or 'closed' conference is a ''non-educational'' course. This is where
                                                                                                             ▪ The attendees are drawn from a narrow range of the public, or
                                                                                                             ▪ The criteria for selection for the course exclude the wider general public, or
                                                                                                             ▪ The benefit is not to a sufficiently wide sector of the public.
                                                                                                             E.g.:
                                                                                                             ▪ A conference or course held for a private organisation where it has been aligned to their needs
                                                                                                             ▪ A conference or course restricted to a group of people rather than to the wider public.
                                                                                                             ▪ Where the conference/course participants are not primarily students, researchers, post graduates or
                                                                                                             university staff

    7)    Consultancy                        The offering of expert and professional advice.                 Examples of consultancy:
                                                                                                             ▪ The provision of advisory services by students, researchers, administration or academic staff that
                                                                                                             includes research and development, and market research, but excluding work mainly on goods.




                                                                                                     Notes
                                                                                2b2318e4-6bc2-49dc-9411-f4a0722a2715.xls
   8)     Non-student lettings and use of The use of student residential accommodation                       Example:
          other premises and facilities   and other university owned premises by non-students                ▪ The use of student residential accommodation and other university owned premises by non-students
                                                                                                             and associated income generated such as provision of bars, and external catering.
                                                                                                             ▪ The provision of accommodation or similar services to third parties for the purpose of generating
                                                                                                             income by utilising surplus activity.

   9)     Is the activity a sharing of costs The sharing of costs such a payroll costs                       Example:
          with an outside body - i.e.                                                                        A medical professor who has two appointments; one with the University and the other with the NHS.
          Oxford is providing paymaster                                                                      The University pays both parts of the salary and recovers the cost back from NHS.
          services?

  10)     Staff secondment                  The detachment of a person from the University                   Example:
                                            for a temporary assignment elsewhere.                            An employee of the University going to work for a different company for an amount of time then
                                                                                                             returning to his/her previous post at the university
                                                                                                             E.g. A member of staff from Engineering Science going to work for Renault F1 Team

   11)    Publishing activity               The principle objects of the University are the                  Examples of "primary purpose" publishing:
                                            advancement of learning by teaching and research and             ▪ Specialist material into new subject areas or building on specific prior publications
                                            its dissemination by every means. University                     ▪ Titles written by scholarly authors
                                            departments that publish books are of educational and            ▪ Learning and educational books
                                            academic material for these purposes.

 12, 13) Sale or service to an              An outside body is anyone who operates outside of the            Example - sale of inventory:
         outside body or general public     University.                                                      ▪ Gift shop sales
                                                                                                             Example - other sale or service
                                            The University is made up of the departments and                 ▪ An outside body using a machine owned by the university, and then billed for 'machine time'.
                                            includes the colleges - Green, Kellogg and St. Cross             ▪ Technical analysis, sample testing, and data processing services.
                                                                                                             ▪ ''Services rendered'' agreements provided by the university.




14) Principles for Apportionment of Reasonable Costs to NPP Activities

Types of Cost                               Description                                                      Examples

          Direct Costs                      Variable costs that relate wholly to the activity, and           The cost of buying goods for sale in a shop. Alternatively royalties may be payable on each sale for the
                                            which are priced according to volume.                            use of intellectual property.

          Fixed Costs (Indirect Cost)       Fixed costs that relate wholly or partly to the activity, and A charge for the use of premises, such as the floor area occupied by a retail shop proportionate to its
                                            which will not change regardless of the level of sales.       size of a larger building. Alternatively a charge for the use of specific equipment.

          Overheads (Indirect Cost)         Organisational or administrative costs that support many Stationery, telephone, heat and light costs that are used by the Department as a whole.
                                            separate activities, and which will not directly reflect the
                                            level of sales.

          Payroll (Indirect Cost)           Cost of staff who may support the trade either wholly or         It will comprise the whole cost of sales staff, and a proportionate cost of Department accounting staff.
                                            partly.


How to identify Indirect Costs

          OX GL Transaction Detail          Run down a list of all expense accounts within the               Refer to the Departmental Guide to Key Financial Reports at
          report                            Department cost centre and flag those which have a               http://www.admin.ox.ac.uk/finance/planning_reporting/processes/
                                            bearing on the activity.                                         Typical indirect costs will be included in Telecommunications, Electricity, Rent, Cleaning…..


Basis for Apportioning Costs

          Purchase Invoices                 Where direct costs are invoiced specific to a single             The cost of branded shirts for sale in a shop should be coded entirely to the NPP activity.
                                            activity, then the whole invoice can be coded either as
                                            PP or as NPP. Otherwise a reasonable portion must be
                                            calculated on a usage basis etc (below) then journalled
                                            across.

          Usage - based on time,        Equipment may be used for both PP teaching and for                   The running costs and consumables of a chemical testing machine could be split say 20/80 between
          average cost, headcount, area NPP services. So a usage charge might be journalled                  teaching and NPP, if used one day a week on average throughout the academic year as a service
          etc.                          based on its usage proportionate to total usage.                     billed to an outside body.


          Periodic Charge                   In many cases the number of separate costs involved        Say total Department overheads are £500k and the approximate Department time spent on NPP
                                            will make it impractical to calculate each separately, and services is 10%. Then an annual journal could charge £52.5k across including a 5% mark up for the
                                            a periodic charge might be calculated using global         skill of necessarily staff involved in day to day running, and separate from any payroll charge.
                                            assumptions for a wide variety of activities. It may be
                                            appropriate to add some mark-up for 'management
                                            services' given too.


Ways of using ORACLE to apportion costs

          Activity codes                    Activity code 25 is the essential flag to distinguish NPP Department gas costs could be coded to AB0000-71120-00-00000-10. A journal to recharge the
                                            income and costs, and it is then automatically accounted portion attributable to NPP activities would debit the amount to AB0000-71120-25-00000-10.
                                            for under Oxford Trading Ltd. Some other activity codes
                                            can used to ringfence specific activities but which must
                                            be wholly PP.

          Cost Centre                       Departmental cost centres are used to divide the income If AB0000 is the Department, then AB9999 might be used for a NPP activity. All NPP income and costs
                                            and expense accounts. Further subdivision can be used would still need to be coded under activity 25 and with some improved reporting use of a separate cost
                                            within Departments to distinguish between PP and NPP centre.
                                            activities of that Department.

          Natural Accounts                  Natural accounts within a cost centre are specific to a
                                            type of cost and cannot distinguish between indirect
                                            costs that are partly PP and partly NPP.

          Grant Module / Project Codes The Grants Module is an effective means of ringfencing
                                       income and costs but which is reserved for research
                                       grants and controlled by Research Accounts. DFC
                                       teams can allocate Project Codes to account in a similar
                                       way for non research grants.


                                                                                                     Notes

				
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