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VAT on contribution towards costs

Consideration for a taxable supply?

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A company which has a loan from an affiliated organisaton recently received a contribution of £10,000 from said organisation towards the costs of renewing the loan.

Should VAT be accounted for on the receipt of the £10,000? My first thought is that it's basically a recharge of costs - so standard rate VAT should be applied - but wonder if I'm missing something that would deem it not to be consideration and therefore outside the scope of VAT?


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By lionofludesch
09th Apr 2020 23:25

What supply of goods or services has the company made to the said organisation?

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By the_drookit_dug
10th Apr 2020 09:23

I think it's a cost sharing arrangement - the company has paid all the costs (legal fees etc) associated with renewing/altering the loan agreement, and has received a contribution to those costs.

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By Les Howard
09th Apr 2020 17:35

Fine line, I fear.
Taxable supply if the £10k is consideration for services; perhaps exempt if relating to a specific supply of credit.

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By the_drookit_dug
10th Apr 2020 09:58

Think I'll have to dig deeper on this transaction. I don't think services have been supplied as such, certainly not by the company, but I'm not sure about the extent of the legal and professional fees.

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