VAT on Lottery Expenses

VAT on Lottery Expenses

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A client has a Lottery Funded Scheme for a substantial sum of money. The expenses related to the Project are being claimed on the business in the normal way.

Whilst the Project is underway, income is not being generated - should the Lottery reimbursements be included on the VAT Return in Box 6 Sales & Outputs?

- Note this will be almost the only income over a 9 month period. Expenses will be very large as will VAT Refund claims for the same period.

Does anyone have experience of Lottery and VAT Returns??
john harris

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By Dave Collier
03rd Aug 2006 12:17

Complicated
If your client has lottery funding then I assume they are a charity? You don't say what the funding is for but normally Lottery Funding would be considered "Outside the Scope" of VAT as it is usually considered to be grant income rather than contract income. It may be that if this is your client's only income and it is "Outside the Scope" then no VAT will be recoverable on inputs. If your client has other VATable income then it may be they could claim part or all of the VAT on inputs depending on circumstances. The of course your client may have exempt income as well which leads you into paretial-exemption territory. The important thing here I would suggest is to get a charity VAT expert on the case as soon as possible! Most larger accountants have charity VAT specialists or you could try a smaller charity specific firm such as Trustient or Sayer Vincent.

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