Taxing grant funding?

[ScrewdriverSteve]

I have applied for some grant funding to help grow my business. Assuming I was successful I may have a problem of being taxed on the grant income before I can spend it.

I have a chance of receiving a grant which will pay for a % of a capital investment. I may receive the grant funding this financial year (my year end is April 5th). But wont spend the money until the next year. This may leave me in the position where I have a large taxable income this year and a massive capital expenditure next year. Is there anyway I can defer income from grant funding to next year so I can make best use of the grant.

Thanks

 

[Scalloway]

If the grant is repayable if the expenditure doesn't go ahead I would move it to debtors at the end of this financial year.

 

[Ola1]

In theory, you might be able to do so, but you really should get your accountant to read through the terms of the grant and check the relevant legislation. There are other factors to consider as well.

 

[David Griffiths]

The normal treatment of grant funding is that it is deducted from the funded expenditure. In your circumstances it would be normal to carry the unspent grant forward in your balance sheet and deduct from the cost of the asset when you buy it.

It is farily unusual for grants to be paid out before you incur the expenditure, however

 

[ScrewdriverSteve]

I am actually in the process of applying for additional/alternative grants in the hope that one may come to fruition. Some are capital grants paid only after the incurred expenditure, others are start up grants which are paid up front with less of an emphasis/restriction on what exactly you need to spend the money on as long as it follows the business plan in the application and you stick to your set out goals. What should I be looking for in the term and conditions to tell me how it is dealt with tax wise.

To make matters even more confusing the change to AIA means I only have £50,000 of capital allowance this year but I have £150,000 next year. (My year end is April the 5th). I'm not a big fan of this rule. I would have thought that AIA should be averaged over the whole year, so you don't end up with a situation where I could have spent something like £400,000 in the 2014 section of my current financial year and only £50,000 this year.