Readers’ forum: Unclear guidance on tax treatment of grants

My client (C) purchased a smallholding and land to create a farm. He has been awarded grants from the Woodland Trust (WT) and the sustainable farming incentive scheme (SFI). I am struggling to find anything conclusive about the tax treatment of the grants.

C operates as a VAT registered general partnership with his wife which also includes a separate trading business run from the farm which makes standard rated supplies. The farm does not make any supplies at the moment as its only income is from grants.

VATSC06311 says that where a payment is not consideration for a supply it is outside the scope of VAT. It seems to me that both types of grant would be outside the scope of VAT. Do readers agree? If this is the case what is the impact on any input VAT suffered?

BIM40451 says that grants...