Topic: VAT on grants
My client carries out horticultural research and development work and it also provides vocational training. It operates the standard partial exemption method. The company is limited by guarantee and is a registered charity. To the extent that surpluses arise, these are reinvested into the company and partly used in the furtherance of training.
The company has been offered a grant to part-fund a new detached building. The building will primarily be used for the company’s activities, but there will be some surplus space which will be let to third parties.
What are the VAT implications of the receipt of the grant and the construction of the new building, and how can the VAT cost be reduced?