Accounting, Taxation, VAT

Are grants and/or donations vatable income?

HMRC says:

“Income will be outside the scope of VAT if it is not payment given in return for a supply of goods or services. It is important to establish that an income described as grant or donation is actually an income that is freely given and the donor does not receive anything in return. Whether income is outside the scope of VAT does not depend on its description but on whether there is a direct link between the payment and a supply.

Where there is a grant or donation income provided to an organisation, it does not automatically make the activities of that organisation non-business or lead to input tax restriction, each activity carried on by a person must be considered separately.”

Reference: “VBNB20900 – VAT Business and non-business basic principles: Outside the scope income

About Phoenix

Accountant | Tax Specialist | Dreamy Entrepreneur | Blogger

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