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HMRC internal manual

VAT Supply and Consideration

HM Revenue & Customs
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Consideration - Payments that are not Consideration: Grants: Charitable Grants

The same issues as for other grants (VATSC51600) need to be considered to determine whether a supply is made. There has been one Tribunal case specifically on a grant from a Local Authority to a charitable organisation: Trustees of the Bowthorpe Community Trust (LON/94/1276A).

The Trust provided work experience for physically handicapped and disabled students and was funded by the local authority. The agreement with the local authority included requirements for the Trust to provide premises suitable for training, to be open for specified periods and to give priority to referrals from social services.

The Trust contended they were making taxable supplies to the local authority, but the Tribunal concluded that the only supply was to the students. Although the authority had priority in deciding who received training and had certain monitoring rights to ensure the Trust fulfilled its obligations, this did not mean that they were receiving supplies from the Trust. Therefore the payment was outside the scope of VAT.