We’re not offering any trailblazers, but as I understand it any money that isn’t directly received from the government is subject to VAT. So all employer contributions are subject. The guidance doesn’t offer much advice other then to approach an accountant for final advice. Although finding an accountant that is aware of the legal implications of government funding is tricky!
Any employer co-investment or funds received above the funding band maximum is subject to VAT at 20%. Keep in mind that you can’t reclaim any input VAT on costs that are attributable to the exempt turnover (i.e. gov funding). Worth noting that there is a de minimis rule for VAT which does allow exempt input vat to be reclaimed. The two tests are:
– Test one: total input tax incurred is no more than £625 per month on average and the value of exempt supplies is no more than 50 per cent of the value of all supplies
– Test two: total input tax incurred less input tax directly attributable to taxable supplies is no more than £625 per month on average and the value of exempt supplies is no more than 50
per cent of the value of all supplies.