Grant Income

Include in VAT Flat Rate turnover ?

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A commercial sports facility receives a grant from a local charity to run a project whereby children get to play some sports activity (not sure exactly what, but I think it's soccer).

Is the grant income to be included in Flat Rate turnover or is it outside the scope?

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Portia profile image
By Portia Nina Levin
23rd Jan 2017 17:45

Is the grant to provide assistance in running the project, or is it obliged to run the project (perhaps with a service level agreement) in exchange for the grant funding.

Essentially it is either consideration for a supply (and thus part of your FRS turnover) or it is not.

VAT is not charged on receiving a bit of cash. VAT is charged on supplies, which are generally valued by reference to the bit of cash received.

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Replying to Portia Nina Levin:
RLI
By lionofludesch
23rd Jan 2017 17:57

Yes, Portia, you've hit the nub of the issue there. There's definitely a link as the project is only viable with the grant and wouldn't exist without their funding. On the other hand, there's a case for saying the customers are the kids.

If it was just the one project, I'd toss a coin and run with it as there's not a lot of VAT involved (£100 or so) but the fact is that this could be the first of many such projects. Over the years, it would more than likely be thousands of pounds.

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Replying to lionofludesch:
Portia profile image
By Portia Nina Levin
23rd Jan 2017 18:39

Yes but the project not being viable without the money is not the same thing thing as having to undertake the project to get the money.

Let us say that I am an expert in the ancient craft of voodoo (did you feel that by the way?) and I have decided to run voodoo classes, but because it is not economically viable I approach the council for a bit of funding, which is forthcoming. Off I go and teach voodoo to wayward teenagers. No supply.

On the other hand, if the local council, knowing that I am a voodoo sage (apologies for using the S word) approach me and say, "Portia, if you run a course of voodoo classes, we will give you £X", then when I teach the wayward youths voodoo, there is a supply. It does not really matter to whom.

The difference is that under the second option I have an obligation to teach wayward youths voodoo, in exchange for which I receive funding.

Under the first option I am able (but not obliged) to teach the spotty oiks voodoo because of the funding, but that does not make it consideration for any supply.

There cannot be a supply of services without consideration.

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Replying to Portia Nina Levin:
RLI
By lionofludesch
24th Jan 2017 13:26

Portia Nina Levin wrote:

There cannot be a supply of services without consideration.

Having spoken to both parties in the transaction , they now accept that consideration is exactly what's being paid here.

Thanks for your thoughts, though.

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