Coronavirus - Accounting for Business Rates Grants - 9/4/2020

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Coronavirus - Business rates grants

We are starting to hear from clients who have received grants from their relevant local authority under the government’s Business Rates Grant schemes.

As a result of this, there are some common questions about the recognition and accounting treatment of the grant income. We have outlined below the answers to some of these common questions:

  • We recommend that the income is recorded as 'other income' or 'grant income' for bookkeeping and accounting purposes. You may have to create a new code in your accounting software to facilitate this.
  • You should receive a remittance advice to support the grant income. When recording the income use the date of the remittance for the posting date.
  • VAT on grant income: Grant income is outside the scope of VAT; therefore, no VAT is payable when you receive a grant. 
  • The income is taxable so is subject to Corporation Tax, however the business can claim tax relief on the expenditure supported by the grant.
  • If you have brought forward trade losses for Corporation Tax – can these be offset against the grant income?

The answer is, it depends:

If the loss happened before 01/04/2017, it can only be used against profits of the same trade.

If the loss happened on or after 01/04/2017, it can be used against total profits.

For example: a client has brought forward Corporation Tax losses which were from their first two accounting years – year ended 31/03/2018 and 31/03/2019. In this case they will able to be offset against the grant income.

Had all the client’s losses been from a year ended 31/3/17, this loss could only be offset against future profits of the same trade and hence, could not be offset against the grant income.

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