Financial contribution, external funding and financial management (Clause 4)

External Funding

The Project Plan in Schedule 1 should set out how any External Funding is to be divided among the parties.

Financial Contribution

It is envisaged that some or all of the parties will make a financial contribution to the Project. If a party's contribution is solely in kind (for instance human resources or Background) that party's contribution for the purposes of Schedule 1 will be zero.

Hardship Clause

In projects where the any financial contribution is not based on the costs incurred, the parties may agree to include a hardship clause in Schedule 1, providing for the Commercial Parties meeting (or at least considering meeting) any unanticipated increases in the University overheads, such as National Insurance contributions.

VAT

In clause 4.2 "similar tax" is intended to refer to the equivalent of VAT in other countries, or any tax that might replace VAT in the UK.

The provision of research services by an "eligible body" to another "eligible body" is exempt from VAT. "Eligible body" is a term defined in the Value Added Tax Act 1994. Typically Universities and government departments (including executive agencies) are eligible bodies but a University subsidiary company, set up to carry on commercial activities, is not. A Sponsor or "partner" in the industrial sector will not be an eligible body.

The result is that, under all the Agreements, where one party is providing services to another, it should charge the recipient of the services VAT at the standard rate and deliver a VAT invoice.

That is not necessarily the case in relation to any external funding received; depending on the status of the funder, that may be exempt from VAT. You should contact your local VAT office if in doubt.

Interest on Late Payments

Clause 4.3 allows interest to be calculated by reference to LIBOR or the Late Payment of Debts (Interest) Act. The Late Payment of Commercial Debts Act allows interest to be charged at a rate that is about 8% over Bank of England base rate. You should choose which you wish to use. Another possibility is calculating interest by reference to the base rate of any high street bank.

Conflicts with Funding Conditions

Before entering into any Agreement you should check the terms of any External Funding and any conflicts should be resolved by amending the terms of the Agreement or, perhaps, by deciding not to use one of the model Agreements.

Clause 4.4 may need to be amended to reflect the requirements of the Funding Conditions.

Financial Arrangements

It is envisaged that one of the terms of reference of the Steering Committee will be to oversee the financial arrangements, but more precise terms should appear in the Terms of Reference in Schedule 4. Any Funding Conditions may include terms about the financial arrangements. You should decide how often financial accounts are to be submitted by the Project Manager to the Steering Committee and complete clause 4.9 accordingly.

Claims for External Funding

The Agreements envisage that the Project Manager will submit claims to the Funding Body. In order to allow him to do so the parties will have to provide him with any information and certificates required by the Funding Body. Some Funding Bodies may require the right to audit and evaluate the Project and the co-operation of all the parties will be necessary if the Funding Conditions are to be met.

Overpayments

It is likely that the Lead Party will have given undertakings to the Funding Body and will be responsible to the Funding Body for repaying the External Funding if there has been any overpayment or if the Funding Body has the right to claw-back any of the External Funding. Each of the other parties therefore indemnifies the Lead Party against any repayments the Lead Party may make on behalf of that other party.

Inspection of Accounts and Records

Any party has the right to appoint an accountant to examine the accounts and records of the Project (Clause 4.10) and any party that is to be paid may inspect the accounts and records of the party making the payment (clause 4.11). You might wish to consider insisting that the accountant is bound by a confidentiality agreement.

Payment of Financial Contribution

The Payment Plan in Schedule 5 should set out when any party is to make payment(s) of its Financial Contribution to another party (and how much those payments will be).