106 Mr. Reynolds asked the Minister for Finance if the VAT content of expenditure in a grant-approved project under the county enterprise boards scheme qualifies for a refund; and if not, the reason therefor. [1910/96]

Whether or not the VAT content of expenditure in a grant-approved project under the county enterprise boards scheme can be recovered is determined by the VAT status of the recipient of the grant. Generally speaking, VAT can only be recovered by VAT registered businesses.

Registered traders in receipt of grants would be entitled to recover the VAT borne in their business inputs in accordance with the deductibility rules provided in the VAT Act.

Grant recipients who are unregistered do not charge VAT on the goods and services which they supply but, as a necessary corollary, they cannot recover the VAT on the items which they purchase in the course of their activities. This category would include small businesses which choose not to register because they are below the turnover registration thresholds, £20,000 for services and £40,000 for goods and exempt entities, for example, non-profit making organisations which are not engaged in taxable activities.