Grants, donations and subsidies

Produced by Tolley
Grants, donations and subsidies

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Grants, donations and subsidies
  • Grants
  • Factors indicating that the payment is a grant
  • Factors indicating that the payment is consideration for a supply
  • Factors that do not indicate whether it is a grant or consideration
  • European grants
  • Relevant case law
  • Donations
  • Subsidies
  • Global subsidy
  • More...

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

This guidance note provides an overview of the VAT treatment of grants, donations and subsidies. This note should be read in conjunction with the Consideration guidance note.

For businesses providing sponsorship, please see the Sponsorship guidance note. For public bodies, see the Local authorities, government and public bodies guidance note.

See VATSC06346 for information on the treatment of dried fodder.

Grants

This guidance note does not cover payments such as grant-in-aid which represent funding of public sector bodies from their parent central government departments for strategic projects such as infrastructure plans, as these payments are always outside the scope of VAT.

Generally, a grant is viewed as a freely given payment for which the recipient supplies no specific goods or services in return to the grantor or third party. As a result, the grant is not treated as a supply for VAT purposes. However, the status of grant funding is a somewhat fluid one; the provision of ‘free’ (ie grant-funded) education is considered by HMRC to be non-business (Notice 701/30 para 3.2). However, in Colchester Institute Corporation, it was held that education which was grant-funded was a business activity. The implications of this decision are as yet unclear but would appear to have an impact on the possibility of zero-rating the construction of certain educational buildings.

A grant can be money that is given by the Government or other organisation to another organisation / body to carry out a specific activity or particular purpose. The National Audit Office describes a grant as “a

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