When does an organisation have to pay tax on grants?
An organisation will have to pay income tax if:
- it has received a grant or subsidy based on ‘income received, income foregone or an income deficiency’
- the payment was made towards expenses incurred in an earning gross income (except government grants)
- surplus from a grant or subsidy become part of the organisation’s general funds
An organisation is not liable for income tax if:
- a grant or subsidy was paid to offset any capital expenses that don’t produce an income
- payment was made to offset the cost of a capital asset or to reinstate an asset
- claims for depreciation must be based on the cost of the asset, less the amount of the grant or subsidy
