Supply and consideration ― grants and subsidies

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note looks at grants and subsidies for VAT purposes. In particular, it considers when a payment will be consideration for a supply and therefore potentially within the scope of VAT.

For an overview of supply and consideration generally, see the Supply and consideration ― overview guidance note.

For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.104.

Is a grant consideration for a supply?

It is often assumed that grants are not consideration for a supply and they are therefore outside the scope of VAT. However, the position is more complex than this. HMRC will not see the fact that something described as a ‘grant’ is determinative of its VAT status. Some grants will be outside the scope of VAT, whilst others will be within the scope of VAT.

At a basic level, it is necessary to look at the substance of the ‘grant’ on a case-by-case basis. If the grant is freely given and nothing is given in return, then

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