CIC client with a grant which stipulates holding a reserve

sjcall

I have a CIC client which has been receiving grants. Each year I match income with expenditure and carry forward any un spent grant at year end to deferred income. This year they have a grant with a condition that they must hold six months running costs for rent a redundancy package etc. My client says this should not be taxable. Can I post the six months reserve to deferred income? Any advice would be gratefully received. Thank you.

davealucas

Sounds to me like you need to created a designated or "earmarked" reserve from your general fund. This would not be deferred income.

sjcall

I can certainly see your point. An after tax reserve, it is beginning to look like that. I have just spoken to HMRC, Corporation Tax who are also in a quandary about this one and are suggesting I should look at this Grant condition as being a "non trading" income Grant.