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.

Parents
  • The example you quote, of the local authority never actually paying over the monies used to fund the administration fee but rather retaining these, including perhaps evidencing this by an internal accounting adjustment, is precisely the argument we've been pursuing with HMRC for some time, ie that such retention of own monies cannot constitute consideration for any supply.  HMRC's contra-view is that, based on the High Court decision in Ashfield DC, once grant monies are quantified and awarded, those monies legally belong to the grantee, even if retained by the grantor local authority, so if the latter retains a percentage of the grant awarded as an administration fee, legally that represents payment by the grantee of their monies to the local authority in consideration of the latter's supply of administration services.

Reply
  • The example you quote, of the local authority never actually paying over the monies used to fund the administration fee but rather retaining these, including perhaps evidencing this by an internal accounting adjustment, is precisely the argument we've been pursuing with HMRC for some time, ie that such retention of own monies cannot constitute consideration for any supply.  HMRC's contra-view is that, based on the High Court decision in Ashfield DC, once grant monies are quantified and awarded, those monies legally belong to the grantee, even if retained by the grantor local authority, so if the latter retains a percentage of the grant awarded as an administration fee, legally that represents payment by the grantee of their monies to the local authority in consideration of the latter's supply of administration services.

Children