HMRC update: Grants vs contracts

HMRC has issued updated guidance (VAT Supply and Consideration VATSC51600) to clarify the position around VAT applicability with regards to grants and contracts – a continual grey area for the sector. The full updated guidance can be read here. HMRC has offered the following pointer: “The principal factor to consider is if a specific supply is made to the funder or a third party in return for a payment. If so then the payment is consideration for a supply, but if this direct link is not established then the payment can be treated as outside the scope of VAT.” The Charity Tax Group is in the process of reviewing the guidance and is expected to comment in due course.

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