I'm working with a charity looking to establish the VAT treatment of a project.
The commissioner of the project is a government funded department and they have an issue with VAT being added to the price, so they wish to issue the funding as a grant. The supplier though, has the obligation to get the VAT treatment correct.
The statutory duty that the commissioner must provide the service is very clear. Not directly linked to this duty, they also have a general power to subcontract and they have the power to give grants. So they are claiming they can therefore give a grant to discharge the stat duty as they have the power to give a grant.
So the question is - as the commissioner is receiving a benefit from a supplier who discharges the statutory duty on their behalf and the supplier is receiving a fee then by definition this must be a contract and cannot be a grant. In my mind a grant cannot be given where the funder is receiving a benefit.
And as it is a contract for services it must be in scope of VAT.