Just wondering if anyone has any experience working with Community Interest Companies in receipt of grant awards? If the income received from grants is above the VAT registration threshold, would the CIC need to register for VAT? and if so would the CIC be liable for input VAT on grants received?
Some background- I work for a charity who is taking on the financial management responsibities of an arts network we are part of. The network is in the process of becoming a CIC as it is a stipulation of a significant grant it has received for the year, it is also in receipt of some smaller grants from various sources. Having never worked in this area, I'm feeling a bit anxious about it. I'm aware that sometimes grants could be viewed more as service level agreements, in which case they would be trading income and thus taxable but I'm not sure how that works in practice.
Interesting question as I have the forms for setting up a CIC part completed on my desk! I love to dream of getting any grants at all, let alone enough to go over the VAT threshold!
Googling your topic heading came up with what looks like some useful results. I just picked one at random that seems to help (tinyurl.com/orqrcmx), but I'm not sure describing a CIC as a Charitable Incorporated Company filled me with huge amounts of confidence in it! It suggests that if services are provided in return for the grant it's trading activity and subject to output VAT. If it's a pure gift to support the business with nothing expected in return except a warm feeling, it's not trading and not subject to VAT. But don't rely on that, as it's not something I need to look into at the moment, but would like to know the answer to!
I think I had read that already through my own googling and apart from confirming that our grant is probably not a grant, I can't say it made things any clearer but thanks anyway. One of my main concerns is who we charge the output VAT to if the grant is considered trading income (and it most likely is). I can't see us being able to charge VAT to our funders and we can't use some of the grant to cover VAT as it's restricted. Some discussions have said the input VAT will cancel out the output but I'm sceptical as to those figures being exactly equal (when does that ever happen?) I'm so confused :(
My Call to Action to find people to help set up the CIC I'm working on, includes looking for someone with experience of grants, so I don't have to research all this stuff on top of everything else. It's been very quiet so far!
EPF Solutions- What kind of grants are you looking for? is it start-up? There is literally millions available for new social enterprises. Just Enterprise have some great training and business support (www.justenterprise.org) and firstport (www.firstport.org.uk/) have a very open policy for applications with two funding streams available, one for testing out an idea and one for development, though please note, these are in Scotland so if you are elsewhere, I'm sure there will be some sort of equivilent set up. There are subscription services you can access as well that will give you access to thousands of potential funders but it all depends on what you are looking for really.
matt123- Sorry, could you explain how that works? would it work like, in a similar way to how you would treat imports for example? charging yourself and then claiming it back, kind of thing, possibly, maybe, think my head may actually implode as it is too late at night and I have malfunctioned!
