grants, contracts, vat, management charges

Forum Categories GENERAL VAT DISCUSSIONS grants, contracts, vat, management charges

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    Client is a charitable organisation. Client receives grants from various sources which it then passes down to various partner organisations (they invoice it as they complete various tasks) retaining some as a management charge.
    Client is very anxious that not all of the income should be treated as its income, as this is badly affecting its partial exemption percentage.

    If the partner organisations invoiced the grant donors directly then even if Client paid out the money, only the management charge would be its income. But without the invoice trail or a list of specific instructions that Client is to pay the specific partners I think we are stuck

    Any suggestions welcome


    This is possible if you can arrange an agency relationship between the parties.VAT legislation recognises two types of agents; disclosed and undisclosed. The agent acts on behalf of another, referred to as the Principal. The Principal authorises the agent to act on his behalf and under his direction. The agent represents the Principal in its dealings with third parties. The relationship between the Principal and agent can be disclosed or undisclosed to the third party. A disclosed agent acts in the name of the Principal, whereas an undisclosed agent acts in his own name.

    Dislosed or undisclosed effects where the goods or services are deemed to be supplied for VAT purposes. The place of supply of the goods or service impacts upon the VAT registration and on-going compliance obligations of both the Principal and the agent.

    Consideration should be given to the terms of the contractual legal agreement between the agent and its Principal so that they reflect the commercial reality of transactions between them.

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