The VAT treatment of donations, grants and sponsorships depends on whether the donor, grantor or sponsor, as the case may be, has received any benefit in return for such payments. Where any benefit is received in return for the payments, VAT implications will arise. However, where no benefit is received, the payments will be treated as outside the scope of VAT as they will not be seen as consideration for a supply.

The VATP011 clarification states where donation and grants do not have any supply, they are considered as out of scope. Generally, sponsorship will be subject to VAT as there is usually associated supply to such sponsorship. Click here to read more.