Accounting for grants

I am in the process of setting up a new business and have applied for some grants. Will these be taxable?

1st September 2008

Generally speaking, grants are set against the expenditure for which they were granted. For example, if you receive a grant for advertising, the amount of that grant will be deducted from advertising costs in your accounts, thus increasing your profits, and therefore the tax due on them.

If the grant is for a capital item, such as plant and machinery, then the cost of that capital item (asset) is reduced accordingly (depreciation) for the purposes of calculating capital allowances.

Some grants may be tax-free - and you should always read the small print or conditions carefully, or get your professional advisor to do so for you, before you proceed.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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