Incoming funds from a government grant

Hi All

Our company has received government support in the form of a small grant.
When that money arrives how do I tag it in an appropriate way?

None of the categories seem quite right for this.

Thanks for any suggestions, Liam

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Under normal rules the tax treatment of grants will depend on whether they are capital or revenue. Grants for start up revenue expenditure are normally trade income and grants, which meet capital expenditure, are normally not trading income.

If a grant is received before the business began to trade, the grant will not be a trade receipt. although the start up grant may need to reduce the amount of expenses claimed, which were paid for by the grant funds. Therefore, it may be worth talking to your accountant on the treatment.

You could follow the guide below, create a sales nominal code and expenses nominal code for the grant and then refer the transactions posted to these nominal codes to your accountant at the end of the year.

Follow these steps:

  1. You will first need to set up the awarding grant body as a new client, visit our knowledgebase guide for further help on adding a new client.

  2. You will also need to set up new nominal codes for both the grant income and expenses, in order to separate them from other income and expenditure, visit our knowledgebase guide for further help on adding a new nominal code.

  3. Now, enter the grant into the relevant bank account the funds were deposited into e.g. Business Bank Account, this can be done by either uploading the transactions from your bank statement or entering the transactions manually as a new deposit, by clicking on the button ‘Input New Transaction’. if you’re using the Barclays Bank Feed, the deposit will appear automatically .

  4. Finally,either raise a new sales invoice for the grant received, making sure to select the awarding body as the client or simply click ‘Tag Me!’ to tag the item directly from the bank and create the invoice from there.

  5. Enter all expenses the grant was used to pay for under the nominal code created in step 2.

The grant income and expenses will now be allocated to the awarding body’s account and also to the new nominal codes.

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