If a charity is concerned that the status of their funding is uncertain, then it should consider the following steps:
- Incorporate a clause into all funding agreements, service level agreements and contracts that states that any fees payable under the agreement are subject to VAT if it applies. This will allow the charity to add VAT to the fees charged, otherwise the fee has to include VAT.
- Clarify the VAT status of the activity in a contract situation and in a grant situation.
- Assess the impact on the organisation under both options so that you can assess how you would like the funding to be treated.
- Seek clarification from your VAT office on the status of a particular funding agreement if you are in doubt.
