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Tax Treatment with A CASC and grant funding

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Hi , I asked this question previously but didnt quite word it an a way to get the answer I needed, so my question is this. A CASC has received grants to fund a new building to the tune of £600k , do these grants have to be accounted for as taxable income on the profit and loss, the costs of the building project ate £680k so can these costs also be accounted for on the profit and loss thus creating a loss or do the costs need to be posted to the balance sheet thus increasing the value of land and property but then leaving a rather large profit on the accounts which would incure corporattion tax . Any advice is very welcome as if my suspician is corect and they will end up with a large profit I wold like to warn them of the liability - Many Thanks

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By Paul Crowley
03rd Nov 2021 09:58

Does this club still not have an accountant engaged?
The tax warning you want to give is incorrect.
What is your relationship to the club?

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Replying to Paul Crowley:
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By Monkgp
03rd Nov 2021 11:50

Hi There, at present the club is between accountants as they feel they received poor advice from the previous ones but we are in the process of applying for a loan and the lenders want management accounts and a cashflow detailing any potential tax liabilities so I volunteered as the book-keeper to try and find this out but it is difficult as there is so much to read in such a short space of time as they loan is required to complete the build, and without the funds there is no way to incur huge accountancy costs either although once the loan is in this should ease the cashflow. Many thanks

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By Bobbo
03rd Nov 2021 10:41

Monkgp wrote:

A CASC has received grants to fund a new building to the tune of £600k , do these grants have to be accounted for as taxable income on the profit and loss

(Assuming for the moment FRS 102 applies)
The grants are accounted for as income in line with paragraphs 34.64 to 34.74. Unless some or all of the grants are from government, in which case section 24 applies.

Whether the grants are taxable is a whole different question.

Monkgp wrote:

the costs of the building project ate £680k so can these costs also be accounted for on the profit and loss

Obviously not. They should, i would expect, be accounted for as a fixed asset in accordance with section 17.

(there are some circumstances where such costs would be an expense rather than an asset but nothing in your post suggests this is the case.)

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Replying to Bobbo:
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By Monkgp
03rd Nov 2021 11:42

Thank you, does that mean the income in the form of grants has to be treated as taxable income and therefore as I suspected a large profit incurred ?
Thank you for your help

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Replying to Bobbo:
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By Monkgp
03rd Nov 2021 11:45

Thank you, I am the book-keeper and we are currently in the process of changing accountants due to poor advice but we are also obtaining a loan to finish the build and the lenders want a cashflow forecast and want to know what tax liabilities we have. A large proportion of the Grants were from local authorities and that is the government which is a relief so these do not count as taxable income then but all other smaller grants do ? I really appreciate the help as I am new and I would likje to get the cashflow correct

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By Monkgp
03rd Nov 2021 11:39

I am the book-keeper and we are in the process of changing accountants as we have received bad advice but I am being asked if I know what if any the corporation tax liability is likely to be and until a loan is secured the club has no funds at present to actually engage an accountant but this will happen as soon as the loan comes through but as per usual the lenders want some management accounts and a forecast of potential tax liability

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By Hugo Fair
03rd Nov 2021 11:44

"I asked this question previously but didnt quite word it an a way to get the answer I needed" ... do you mean you didn't get the answer you wanted (rather than needed)?

I ask because your previous post received useful answers and even an offer of help ... so it's not clear what is it that you want but did not get previously (given that your scenario doesn't appear to have changed)?

It sounds like you're trying to avoid CT (that may not be due for all we know) by the incorrect treatment of building costs ... which is why you (or the CASC) really need to appoint an accountant ASAP.

BTW it would help any potential responders if you made clear what your relationship is to the CASC.

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Replying to Hugo Fair:
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By Monkgp
03rd Nov 2021 12:09

Hi , just to be clear, the club is not in any way trying to avoid tax, it is just not aware of what tax it should or should not be paying and has been ill advised in the past, yes you are correct I did get some advice when I last posted but I was then struck down with a horrible flu bug which lasted 10 days and that coupled with my lack of expertise in using this site left me unsure of how to get back to my previous post. Yes the club does need to appoint an accountant ASAP but currently does not have the funds to do so and has the urgency of obtaining the loan which means it is unable to settle any bills until funds are through and funds wont come through without the requested information, this is not ideal and it is why I am trying my hardest to find out whether there is a large tax liability or not, I hope you can understand the situation in so far as one is required before the other - Thank you for your help

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Replying to Monkgp:
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By Leywood
03rd Nov 2021 17:01

You are their bookkeeper.

So you should not /nor are qualified to give accountancy nor tax advice. Your PII will not cover you doing so.

You need to admit that this is well beyond both your capabilities and your job description as you are not helping them nor any potential lenders by continuing. No shame in admitting that.

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By Paul Crowley
03rd Nov 2021 13:17

With all due respect you need a proper qualified accountant in place now. You are not up to this and things are likely to come crashing down if DIY continues

What makes you think the accountant will need money right now before advising.
Lender would be daft to lend on the current basis of volunteers trying to wing it using the internet for tax advice

The trustees or whatever they are called on a CASC need good advice from a reliable professional

"Between accountants" for a club with in these circumstances is daft
You even turned down free help!
https://www.accountingweb.co.uk/any-answers/treatment-of-grant-funding-a...

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By johnt27
03rd Nov 2021 16:26

You may have reworded the question but it doesn't change the previous answers you received.

This is a capital grant that will be recorded on the balance sheet. The building project will also be recorded on the balance sheet and once completed the depreciation and grant will be released to P&L over the useful economic life.

Capital grants are not typically taxable and I refer to my previous answer on the old thread

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Replying to johnt27:
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By Monkgp
03rd Nov 2021 18:04

Thank you, that is very helpful and very concise, and I can now progress the cashflow accordingly, I am very grateful and my apologies for any mis understanding previously but it is mostly to do with not knowing how to navigate back to my original thread and when i have clicked on a link that was left by a previous message it says it is no longer available so many thanks

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Replying to Monkgp:
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By Paul Crowley
03rd Nov 2021 20:47

I gave you the link!
I refer to my prior posting

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