Pirbright Institute relieved after avoiding VAT bill of up to £25m

The bill would have related to construction of the Plowright Building in Woking, Surrey, but a review by HM Revenue & Customs did not result in a demand for payment

Plowright Building
Plowright Building

The animal disease research charity the Pirbright Institute has avoided a VAT bill of up to £25m that would have threatened its future viability, after a review by HM Revenue & Customs.

The institute’s accounts for the year ending 31 March 2015, which were filed with Companies House last month, describe a contingent liability relating to the VAT treatment of the construction costs for the Plowright Building, a state-of-the-art high-containment laboratory that includes the National Virology Centre.

The Plowright Building, which is in Woking, Surrey, was funded by £135m of capital investment from the Biotechnology and Biological Sciences Research Council. Building at the site was completed in early 2014 and scientific activity in the building began in early 2015.

The institute was exempt from VAT on construction costs so long as income related to the building complied with a 95 per cent non-business activity rule.

A spokeswoman for the institute said that the charity’s exemption was approved by HMRC and a VAT certificate was issued, but HMRC subsequently reviewed its position.

The accounts say that VAT paid on the Plowright Building could have been as much as £25m, which would have risked the long-term viability of the institute.

"The magnitude of the liability, if payable, would be likely to have a significant impact on the financial statements and would not be able to be funded out of the institute’s available cash reserves," the accounts said.

"These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern."

The Pirbright Institute’s accounts show that its income for 2014/15 was £63.7m, almost £2m more than the previous year, and expenditure was almost £49.6m, £3m less than the year before.

In a statement, the institute said it was pleased that HMRC had resolved the VAT issue and "there is no longer any uncertainty over the matter, nor any liability payable by the institute in respect thereof".

An HMRC spokesman said it did not comment on individual cases.

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