I have a HMO, I have received a council grant to assist with repairs and on the bases that I let to the council at a reduced rate on a 5 year contract.
When filling my accounts how do I show this grant if at all?
Actually the grant is wholly for repairs, they just used it to negotiate rent down. So I assume this grant would be set off against repairs.
If this is correct who's to say what I can off set against. For instance they requested it be spent on Washing Machine and Oven for example.
So with the new rules I can't claim for Washing Machine as it is not a fixed appliance but I can claim repairs allowance for oven as it is classed as fittings.
So can I claim the first £500 of the grant against Washing Machine, then the rest against fittings?
the grant should not be recognised until the conditions of receipt have been satisfied.
In this instance it seems as though the conditions are in agreeing to the contract so that would seem to be satisfied.
Next when to recognise.
This is for repairs so its revenue expenditure against damage already incurred.
Recognise in relation to the costs to which the expenditure relates.
The grant was for general repairs to the property although it sounds as though the amount is more than the actual cost of the repairs.
There is an a minor issue in that if for any reason the grant is rescinded due to failure to comply on your part (maybe through no part of your own) then the grant would be repayable. Now, the probability of having to repay the grant is remote so I am not in this instance seeing any reason to justify creation of a provision.
Just be aware that the grant remains repayable until all of the criteria of receipt have been complied with and in this case thats five years away so the financial statements should at least include a note on the contingent liability.
Considering the above the double entry as far as I can see is a straight :
Dr Bank
Cr Grant (Income Statement, treat as revenue but seperate from turnover)
Cr Bank
Dr Repairs and renewals
The Grant revenue is therefore automatically set against the expenditure through the income statement.
The actual link to the expenditure to which the grant related is lost as this is a revenue based grant. So, it really doesn't matter that the two are different amounts.
This will have the effect of increasing your profits by the additional revenue to match the expensed expenditure to which the grant related.
So basically, recognise it as seperate revenue on the face of the income statement and the rest all sorts itself out in the wash.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
p.s. just been promted offline by one of the regular readers of the site that I'm letting the side down by not mentioning the relevant accounting standards (just no pleasing some people).
For further info, under UK GAAP refer to SSAP4 accounting for Government Grants and under Internation standards of reporting refer to IAS20 Accounting for government grants and disclosure of government assitance.
For the line about the contingent liability also refer to FRS12 Provisions, contingent libilities and contingent assets (UK GAAP) and IAS37 Provisions, contingent liabilities and contingent assets under international standards.
p.s. 2 (nobody else will understand this reference) Happy now with the back to normal level of answer monkeys uncle (you know who you are, lol).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The grant is miscellaneous income so 49xx series sounds good.
Personally I don't use Sage but sure that there will be a Sage expert along imminently to confirm or deny that.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
