Do you include grant income in turnover for calculating flat rate VAT?

Is grant income included in T/O for flat rate VAT?

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Dear all,

My client has received a one off training grant and I would like to confirm if this should be included in my turnover figure when calculating VAT on a flat rate scheme?  I think it is out side the scope therefore would not be included but would like to confirm this.

Thank you, Melissa

Replies (6)

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Worm
By TheLambtonWorm
15th Jul 2016 14:27

As a guess I'd like to say it shouldn't be taxable as I don't think it's chargeable consideration.

Also, would be a bit weird if you have to charge VAT to the people giving the grant.

Please place reliance on my comment though.

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By Mohit Baheti
15th Jul 2016 14:37

The applicability of VAT is totally based on the fact that whether income is received as a non-business grant, or by way of business under a service contract.

Mere stipulations pertaining to proper use of funds would not let the Grant be classified as a business income. For a Grant to be Vat-able there must be some direct or indirect consideration flowing towards the Grant Funder. Any current or future benefits or promises may render the Grant Vat-able.

Conclusion is that if there is no clear cut reciprocal act or commitment from the receiver of Grant then no VAT is applicable. Decision can be made on case to case basis.

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Worm
By TheLambtonWorm
15th Jul 2016 14:39

VAT notice 733 says you don't include income that's outside the scope of VAT (para 6.3).

I guess grants are outside the scope of VAT, as there isn't a supply of goods or services.

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Replying to TheLambtonWorm:
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By Mohit Baheti
15th Jul 2016 14:47

Grants are not absolutely out of the scope of VAT, the reason is the possible abuse of the provision to actually provide business related services under the disguise of "Grants" hence the only thing need to be taken care is that there must not be any retrospective benefits provided to the Grant Funder directly.

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Replying to Mohit Baheti:
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By Mohit Baheti
15th Jul 2016 15:01

Mohit Baheti wrote:

retrospective benefits

Reciprocal benefits**

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By shaun king
16th Jul 2016 11:06

In English - if the grant is freely given with no expectation of anything in return it is outside the scope of VAT ansn't included in the FRS.

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