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taxadvisor.uk, Chartered Certified Accountant
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I set up a community interest company and I received a

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Hi I set up a community interest company and I received a grant for £15,000 through a funder called Unltd. This funding was given to me as an individual but i am using it in whole for the company. It is a flexible grant to be administered as i see fit, and i can draw down portions as and when I need it, in the first year of accounts i drew down two payments totalling £9500. I have £5500 outstanding which will is being drawn down in the second year of trading. It has been used to cover some items of capital expenditure, pay rent on premises and insurance. How would I show this on a balance sheet and in turn in the profit and loss? Would the remaining £5,500 show up as a debtor or deferred income?

Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Please clarify for me

Is the grant money in your name as a named person but for the benefit of the community interest company?

Is the money sitting in your personal account?
What amount was spent on capital expenditure?

Many thanks
Customer: replied 2 years ago.

The grant was given to me as an individual, the money comes into my personal account and I have paid for items as they have been required. Of the £9500 drawn down I have spent £5600 on machines and tooling, £2000 on rent, £1200 on training and £700 on insurance.

Expert:  taxadvisor.uk replied 2 years ago.
Simon, thank you for your reply and explanation.

Basically, you have drawn down sums out of your own personal account to meet company expenditure.

As the money has not touched the company bank account, it is neither a debtor nor deferred income in the company's accounts.
The ramaining funds are in your personal account.

If I were you, I would mention it in the notes to the accounts and show how the grant has been dealt with.

The grant received for revenue expenditure would be shown in profit and loss to match the costs.

Capital grant would be recognised in profit and loss account over the life of the asset.

Accounting for grants can be found on this article by the ICAEW here

http://www.icaew.com/en/members/practice-resources/icaew-practice-support-services/practicewire/news/accounting-for-grants

and an article here

http://www.accountingweb.co.uk/article/accountingweb-guide-grant-accounting/526978

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.


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Customer: replied 2 years ago.

Thank you very much for your response it is becoming clearer. As I have dealt with it in this way what should i say in the notes for the account and how should I word it on the profit and loss and the balance sheet. I will not be claiming the money back and it will all remain in the company.

Expert:  taxadvisor.uk replied 2 years ago.
Simon, thank you for your reply.

A note to the accounts – consider this/edit for your use.

Accounting for grant

A flexible grant of £15,000 was received by the director in his personal capacity from UnLtd. The director has utilised £9,500 of the grant during the accounting year to cover revenue and capital expenditure of the company.

Revenue based grant has been recognised in the profit and loss account in the same period as the expenditure to which the grant relates.

Capital grant has been recognised in the balance sheet by treating the amount of the grant as deferred income which is credited to the profit and loss account by instalments over the expected useful economic life of the related asset on a basis consistent with the depreciation policy.

Explanation for illustration purposes only and not part of the notes to the accounts.

Offsetting the grant against the cost of the asset is prohibited under the Companies Act because the statutory definitions of “purchase price” and “production costs” do not make any provision for any deduction from that amount in respect of a grant. As a result, incorporated entities must recognise any unamortised grant(s) as a liability within the balance sheet as ‘deferred income’.


The entries in the books must be in accordance with option chosen..:


On initial recognition

DR fixed asset additions

£60,000

CR cash at bank

£60,000

Grant receipt

DR cash at bank

£20,000

CR deferred income

£20,000

Depreciation

DR depreciation charge P&L

£6,000

CR accumulated depreciation

£6,000

Grant release over the life of the asset (10 years)

DR deferred income

£2,000

CR grant income P&L

£2,000

I hope this is helpful.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it.

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