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.