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HMRC internal manual

VAT Supply and Consideration

Consideration: Payments that are not Consideration: Grants: Background

Although a grant is different from a donation, the same questions as for donations must be considered. Although Local Authorities, Government departments and the EC make supplies in their own right, they make many grants to provide financial assistance to a wide variety of schemes.

Like project funding above, conditions may be attached to the grant to make sure the payment is being used for its intended purpose. However, our view is that this doesn’t turn the payment into consideration for a supply. The two Tribunal cases of Hillingdon Legal Resource Centre (VATSC52000) and Wolverhampton Citizens’ Advice Bureau (VATSC52200) support this view. You must also consider the example of Keeping Newcastle Warm (VATSC43000), where a grant was found to be third party consideration.