Accounting for grants

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.

Date published 5 Dec 2012

This article is intended to inform rather than advise and is based on legislation and practice at the time. 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 article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.