VAT Ruling Warns Charities to Review Public Funding and VAT Exposure

• A Court of Appeal ruling in HMRC vs Colchester Institute could have major VAT implications for charities, colleges, and other not-for-profit organisations receiving public funding.
• The decision shows that grants tied to delivering specific services or outcomes may be treated by HMRC as payment for taxable supplies, not just VAT-free subsidies.
• Azets warns organisations should review funding agreements, especially where payments depend on targets, services delivered, or reporting obligations.
• Reclassifying funding could affect VAT recovery, exempt/taxable income, fuel and power relief, and other VAT exemptions.
• Charities and third-sector bodies should not rely on the word “grant” and should seek specialist VAT advice if needed.

Source: renfrewshirechamber.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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