Grant

What it means

A grant is a non-repayable public contribution for a defined purpose. It is not income on receipt: it is recognised so that it meets the costs it is meant to cover.

For an operating grant that means deferring it into income in the period of the costs. For a grant on fixed assets it is released in step with depreciation.

A grant differs both from a tax relief such as the super-deduction, which brings no money and only lowers the tax base, and from a subsidised loan, which is repaid. The source may be the state, a municipality or EU funds, but the accounting logic is the same: the income is matched to the costs the grant covers.

How it works in practice

The project is kept separately: its own cost centre or analytical accounts, so that grant-funded and own-funded spending can be split at any moment. Without that, the funder’s audit becomes a problem.

Conditions usually include procurement under the call’s rules and sustaining the result after the project ends. A breach means repaying part or all of the grant.

Under reimbursement the company pays the costs itself first and receives the grant only once its payment claim is approved, often months later. We therefore plan the project’s cash flow with the client in advance, with a bridging loan if needed, so the project does not stall because the funder pays late.

What to watch out for

A grant on assets reduces tax depreciation and a grant on costs raises income. Companies that miss this plan for a tax saving that never arrives.

A VAT payer that deducts VAT on purchases must not also claim it as an eligible project cost. The funder’s audit almost always finds such double funding, and the company repays that part of the grant, often with a penalty for breaching the contract as well.