My company has just been awarded a grant for the project they are completing. This is the only income related to this project and the Grant attaches no specific requirements; so is outside the scope of UK Vat.
However, I understand we will not be able to reclaim any of the input Vat directly related to this project, but how are these expenses reported on the Vat return. Are these reported as outside the scope and left off the return, or should they be input as Zero rated, thus still being included?
Thank you.
Sam
Replies (6)
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From what you've said it's tricky to understand exactly what the relationship is between your company, the charity and the seminar you are providing. That's not a criticism of your comments I’m just setting the scene for what I'm about to say.
Firstly - output tax
A grant is outside the scope of VAT, but the inference form your OP and subsequent comment is that your company is providing the seminar in return for a grant. It doesn't matter that the charity plays no part in it, this would still constitute a supply for on which VAT should be accounted for. But assuming I haven't grasped the position fully and the grant is entirely dissociated from the seminar this doesn't mean you can't recover input tax on the cost of running this.
Secondly - input tax
Assuming the seminar has some nexus and a commercial purpose, even if only to raise the profile of your company's name, input tax on the costs can be recovered. Running a seminar is not an exempt supply even where the attendees aren't paying for it and so as long as it has a business purpose for your company VAT is recoverable.
Just to be clear
No problem
If the grant has no link to the seminar or stipulation that in return you carry out a service or make a supply of any kind to anyone then there's no output tax to worry about.
Input tax can be recovered in connection with an activity that is outside the scope of VAT as long as there is a business reason for it.
TC
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