EC FP7 Update

EC FP7 Update

The situation on FP7 costing - main points:

  1. Indirect Costs Calculation

    1. According to the Commission's Finance Guide, Indirect costs for FP7 projects can be calculated either as Real Indirects or (for HEIs that cannot calculate Real Indirects) as 60% of Direct costs less Subcontracting. The rate of 60% is transitional until 31/12/2009. Afterwards it will be reduced to approx. 40%.

    2. UK approach: instead of each institution developing its own Real Indirects calculation, Universities UK, HEFCE and DIUS (Department for Innovation, Universities and Skills) have commissioned JM Consulting to come up with a method of calculating Real Indirects costs based on TRAC. The JM Consulting report was finalised in December 2007 after long consultation process with the Commission. KPMG has given the view that there is nothing in the Commission's requirements that is not being met by the amended version of TRAC. The new version of TRAC suitable for calculating real indirects for FP7 contracts is called TRAC EC FP7.

    3. TRAC had to be amended for FP7 to make sure that some costs, considered ineligible by the Commission, are excluded from calculating the rates per FTE.

    4. One of the requirements of TRAC EC FP7 is the completion of timesheets by all staff working on FP7 projects. The University has adopted a timesheet proforma (Appendix 1).

    5. TRAC EC FP7 is not a compulsory system for the UK. Institutions that currently operate robust TRAC system should be able easily to adapt them to develop TRAC EC-FP7. Institutions can alternatively opt to use a flat rate for indirect costs (60%). However, institutions that can identify real indirect costs but have opted to use the flat rate instead will receive a lower Commission contribution that those institutions that are using the flat rate because they cannot identify real indirect costs. It could be argued that with the approval by the EC of J M Consulting report all UK Universities are now in the position to use real indirects cost method.

    6. The move from an Indirect Cost rate of 60% on everything to FEC on staff only will make projects with high non-staff costs less financially attractive (the non-recovery of VAT will add to this). The attached example illustrates this point. (Appendix 2).

    7. The rates for TRAC EC FP7 will be published at a later date once they are audited.

  2. VAT Update

    Under previous Framework Programmes, any expenditure of VAT was not recoverable from the European Commission but could instead be recovered from UK Customs and Excise and so there was no loss to GU. Under FP7, the EC is not going to pay any VAT but UK Customs and Excise isn't going to allow it to be recovered either.

    The reasons behind this are complex, but relates to the status of the awards and Customs and Excise state that VAT should probably not have been recoverable on FP6 projects.

    The impact of this change is that GU has no way of recovering any expenditure of VAT on FP7 projects. This could impact on travel, consumable or equipment cost but not of course staff costs.