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HMRC internal manual

VAT Supply and Consideration

From
HM Revenue & Customs
Updated
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Consideration:- Payments that are not Consideration: Grants: Treatment of dried fodder

These types of grants are paid throughout the EC by governments to producers of animal fodder in order to keep the price of dried fodder competitive with non-EC producers.

Until 31 December 1999, the UK treated grants paid to processors of dried animal fodder as outside the scope of VAT. However, this did not follow EC policy and so from 1 January 2000 the UK accepted the grants were within the scope of VAT, since animal fodder is zero rated and related grants would follow the same liability. This also applied to processors who process the grass of a third party and return it to them after drying, although this is not something that happens frequently in the UK.

However, following an ECJ case in 2004, the EC policy is to treat these grants as outside the scope of VAT and so the UK will revert to its original position. Therefore the grants are to be treated as outside the scope of VAT from 1 April 2005.