ADMINISTRATION OF DISABLED FACILITIES GRANT ETC

We arrange grants for various housing renovations and charge a percentage fee for doing so.  We do not invoice the householder but charge the fee directly against capital with the income going into revenue rather than give the householder the money from capital to pay us back.  The capital is paid out of the council's own funds. The practice is to charge VAT on this admin fee.

I can see that VAT would be chargeable if this was done the long way around (and not the shortcut version above) but is there another way to do it to avoid any VAT implications?  Could we just do an internal transfer from capital to revenue and NOT charge the applicant?

Many thanks.