VAT threshold - CIC Donations and Grants

I would just like to check whether grants and donations received by a CIC count towards the £85k VAT threshold? From my understanding, grants and donations are out of the scope of VAT (based on what I’ve read on the HMRC guidance pages) so won’t count towards the threshold but we’d like to be 100% sure so it doesn’t cause problems in the future.

 

Hi. If you receive grants and donations which are freely given then they would not constitute a taxable supply Please see the guidance below: VAT Supply and Consideration   VAT Supply and Consideration    . Thank you.

Read the HMRC guidance. You have to determine if there is a supply being made by the CIC in return for money (grant). Donations are freely given with nothing in return, donations are fairly straightforward in determining the VAT treatment, but if say a local company donates £5,000 of football kit to the CIC and the football kit as the companies branding on it, that is not a donation, that is advertising, the company is paying to have their names on the kit. Grants can be more complex, you have to read and understand the contract or agreement by which the funds are coming to you, what are you doing in return for this money? For example, if the local council give you money to advise Council tenants on rent arrears then you are supplying a debt advisory service to the Council, but if the Council gives you money to help and advise anyone who has debt problems and the Council simply wants an update as to how many people you've helped, then that is more likely outside the scope of VAT/not counting towards the VAT threshold. You may need to seek advice from an Accountant or write to HMC and seek a non-statutory clearance giving as much detail as possible, it will be difficult for HMC on this forum to give you an accurate answer as HMRC would need to understand more detail about the funding, where its from, why it is been given, who benefits, etc.