grants, contracts, vat, management charges

[Nonimous]

Client is a charitable organisation. Client receives grants from various sources which it then passes down to various partner organisations (they invoice it as they complete various tasks) retaining some as a management charge.
Client is very anxious that not all of the income should be treated as its income, as this is badly affecting its partial exemption percentage.

If the partner organisations invoiced the grant donors directly then even if Client paid out the money, only the management charge would be its income. But without the invoice trail or a list of specific instructions that Client is to pay the specific partners I think we are stuck

Any suggestions welcome

[les35]

I have a number of comments:
1. can you agree a Pt/Ex method that excludes money passed through the organisation? I have just done that with a client.
2. Check the updated HMRC guidance in https://www.gov.uk/hmrc-internal-manuals/vat-supply-and-consideration/vatsc51600 which provides further analysis of the VAT treatment of 'grants.'
3. Can you negotiate an agency arrangement, so the money goes direct from funder to recipient?