Contract or grant?

Commissioning is a process - it can lead to a grant programme, contract opportunities (procurement) or a combination of the two.

Knowing whether your group has been awarded a contract or grant is essential.  

Grants

  • a grant is a donation
  • a grant may be eligible for Gift Aid, depending on the donor
  • all or part of a grant can be reclaimed (clawback) if it is not all spent or the grant agreement is not complied with
  • a grant is usually not subject to VAT

Contracts

  • a contract is a mutual agreement – the funder gets something in return (e.g. goods or services) and is covered by contract law
  • a contract is a commercial agreement, liable to tax & VAT
  • contracts with the public sector are subject to EU public procurement rules
  • underspent contract funding cannot be reclaimed by the funder
  • if the terms of the contract are not complied with, the funder could have the right to sue your organisation

How to find tender opportunities.

Service Level Agreements (SLAs)

Service Level Agreements are simplified contracts and it is often unclear whether the funding is a grant or a contract. You may need to get clarification from the funder, and if in any doubt assume they are legally binding agreements. 

Often, funders are explicit about whether funding is a contract or grant but you can always ask if this is not clear.

Because there are accounting and tax implications, you will need to agree the status of the funding with the funder.


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