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Research under EU Framework(s)

Horizon 2020

Horizon 2020 is the biggest EU Research and Innovation programme ever with nearly €80 billion of funding available over 7 years (2014 to 2020). 

Funds received by researchers under Horizon 2020 are confirmed to be grants.

Grant in aid paid to fund research does not constitute consideration for any supplies by the person receiving the funding to the person paying it. In these circumstances, research that is wholly grant funded is not a business activity for VAT purposes and is not within the scope of VAT. Any VAT incurred in the course of such funded research is not deductible.

However, where the funding is, in effect, used to subsidise a business activity i.e. the research results in something which the research organisation or its partners can exploit commercially; VAT can be recovered subject to the normal rules."

Where irrecoverable VAT exists under the H2020 scheme it can form an eligible cost and therefore be charged to the grant code.

Specific codes have been attributed to this type of research:-

Analysis codes beginning with

  • XEH
  • XERH

and Marie Curie H2020 grants with an analysis code of XEC273 and above

As a consequence of the above any VAT inclusive purchases coded to a XEH, XERH, XEC273+ can only be coded as “N” or non-recoverable.  VAT is an eligible cost to the grant code.

Framework 7 grants (see also Marie Curie grants below)

The 7th Framework Programme funded European Research and Technological Development from 2007 until 2013.

As with Horizon 2020 above funds received under framework 7 were confirmed to be grants.

Unlike Horizon 2020 however the EU did not allow irrecoverable VAT to be reclaimed from the grant.

Specific codes have been attributed to this type of research:-

Analysis codes beginning with

  • XEU
  • XERC

As a consequence of the above any VAT inclusive purchases coded to a XEU or XERC code can only be coded as “N” or non-recoverable.  VAT is not an eligible cost to the grant code and therefore any irrecoverable VAT has to be charged to the relevant school.

Marie Curie Grants

Framework 7

Marie Curie Grants under Framework 7 follow the same tax treatment as Horizon 2020 grants.  That is to say

For analysis codes XEC 226 to XEC272, any VAT inclusive purchases can only be coded as “N” or non-recoverable.  VAT is an eligible cost to the grant code.