Share

Technical briefing: VAT and grant admission

Technical briefing: VAT and grant admission
News

Technical briefing: VAT and grant admission

Finance | 1 Feb 2006

Graham Elliott discusses a grant admission case brought before the Manchester VAT tribunal  

It is relatively common for a charity to administer the passing on of grants given by a provider, such as a government quango. In this situation HMRC generally follows either of the following approaches. If the grants are given into the ownership and control of the administering charity, and the ultimate decision for allocating any grant to other bodies lies with the charity, all of the receipts from the initial funder are deemed to be grants, and outside the scope of VAT.

Where the same broad facts apply, but the ultimate funding body retains the last word on how the grants are distributed, and allows the intermediary charity to retain a certain percentage of the grant to run the operation, the charity is treated as providing services of administering the grant. This is because it does not have ultimate control over the grants so cannot be deemed to have received the funding in its own name. The more obvious recipient of these services is the ultimate funding body, and those services might attract VAT at 17.5 per cent.

It is surprising, therefore, that HMRC decided to take a case against the Birmingham & Solihull Learning Exchange Limited, in the Manchester VAT tribunal, (reference number 19310), on the basis that the services in question were provided to the recipients rather than provider of the grants, which in this case, were learning centres of various types. The tribunal was asked to consider whether the retained 10 per cent of grant revenues constituted consideration for a supply of services to the learning centres. Although the tribunal chairman complained that she was given relatively little information on which to base that decision, she decided that there was very little evidence that any actual service was provided by the appellant organisation to the recipients of the grants themselves. On that basis, she was not willing to say that there was any supply for VAT purposes.

The puzzling aspect is that she was not asked to decide whether any services were made by the appellant to the ultimate funding body, the Learning & Skills Council. Had the tribunal considered this, it may well have concluded that there were services provided in that direction, and this would have conformed to HMRC’s general policy. The decision, perhaps misleadingly, suggests that the above circumstances do not constitute a business activity at all, whereas in fact the decision does not go that far.

Far from clarifying the legal position, this decision gives rise to yet another layer of general confusion. It is a pity that HMRC did not give this issue sufficient consideration from a policy perspective before taking a case on it, and it would be a general improvement if arguments it presents in such cases were consistent with its policy positioning.

Graham Elliott is a partner at haysmacintyre

Comments

[Cancel] | Reply to:

Close »

Community Standards

The civilsociety.co.uk community and comments board is intended as a platform for informed and civilised debate.

We hope to encourage a broad range of views, however, there are standards that we expect commentators to uphold. We reserve the right to delete or amend any comments that do not adhere to these standards.

We welcome:

  • Robust but respectful debate
  • Strongly held opinions
  • Intelligent relevant discussion
  • The sharing of relevant experiences
  • New participants

We will not publish:

  • Rude, threatening, offensive, obscene or abusive language, or links to such material
  • Links to commercial organisations or spam postings. The comments board is not an advertising platform
  • The posting of contact details for yourself or others
  • Comments intended for malicious purpose or mindless abuse
  • Comments purporting to be from another person or organisation under false pretences
  • Gratuitous criticism, commentary or self-promotion
  • Any material which breaches copyright or privacy laws, or could be considered libellous
  • The use of the comments board for the pursuit or extension of personal disputes

Be aware:

  • Views expressed on the comments board are left at users’ discretion and are in no way views held or supported by Civil Society Media
  • Comments left by others may not be accurate, do not rely on them as fact
  • You may be misunderstood - sarcasm and humour can easily be taken out of context, try to be clear

Please:

  • Enjoy the opportunity to express your opinion and respect the right of others to express theirs
  • Confine your remarks to issues rather than personalities

Together we can keep our community a polite, respectful and intelligent platform for discussion.

Free eNews

Save the Children and RB launch programme to reduce child deaths from diarrhoea

30 Mar 2015

Save the Children and health and hygiene company RB have launched a programme as part of their ongoing...

Chief executive of Apple latest to sign up to the Giving Pledge

30 Mar 2015

Tim Cook, the chief executive of Apple, has pledged to donate the majority of his $800m (£537m) fortune...

Macmillan Cancer Support announces £3m corporate partnership with owners of Argos

27 Mar 2015

Macmillan has today announced that it is launching a two-year partnership with Home Retail Group, which...

Children’s cancer charity told by Commission to appoint more trustees

30 Mar 2015

The Charity Commission has given a charity where one of the founding trustees was accused of using funds...

Commission opens inquiry into learning disability charity accused of 'repeatedly defaulting' on its accounts

30 Mar 2015

The Charity Commission has opened a statutory inquiry into a Sheffield-based charity that was previously...

Aid charity founder and former chief executive denies fraud charges

30 Mar 2015

Tom Henderson, the founder and former chief executive of ShelterBox, and his son have both denied charges...

Social media 'slacktivism' encourages people to donate, finds JustGiving report

18 Mar 2015

People who share a fundraising page on social media are four times more likely to donate than those who...

Samaritans closes Twitter monitoring app permanently

11 Mar 2015

Samaritans has confirmed that it has permanently closed its app that was designed to monitor people’s...

Daniel Phelan dies, aged 58

13 Feb 2015

Daniel Phelan, owner and editor-in-chief of Civil Society Media, passed away on Wednesday following a...

Join the discussion

 Twitter button

@CSFinance