Dividends Certified Eligible Remuneration Cost for EU Funding

8th November 2016

By using approved CoMAv methodology, Whitings were successful in requesting that the European Commission reconsider their initial ruling that dividends are not eligible for reimbursement on FP7 projects.

 

Many businesses work on collaborative projects, funded by the EC. These projects are regulated by the notoriously complex EC grant funding agreements. The most recent round of such agreements, Framework Programme 7 (FP7), specifically disallows dividends as an eligible, and hence reclaimable, project cost. This creates a problem where dividends merely represent a tax efficient form of remuneration, which is common nowadays in many SME businesses.

Whitings represented just such a new client, which provides ICT services. Although FP7, by its very nature, is project funding, for this particular company, it represented approximately 70% of its annual revenue, so it was effectively core funding. Classifying the owners input into the business, represented financially by the dividend payments, as costs ineligible for FP7 reimbursement, would have left a black hole in the company finances, which could quite easily make the business insolvent and hence no longer a viable going concern. By using the EC approved Certificate of Methodology on average personnel costs (CoMAv) for SME businesses, Whitings were able to negate the ineligibility that attaches to dividends generally. After months of uncertainty for the client, the EC accepted this alternative format of claim and released the full funding.

Ian Piper, the Whitings partner who led the CoMAv procedure, commented ‘that this result is a huge relief to our client, who is now able to balance their books and continue business-as-usual. EC funding rules, and in particular FP7, are incredibly complex, providing funding for cost recovery, only. So denying reimbursement of the proprietor’s time input, seemed truly unfair. Thankfully, in a slightly unexpected result, common sense prevailed in the end’.

Other items in Audit and Assurance
Jaimie King
2nd May 2023 How ISA 315 will impact your audit

ISA’s are the International Standards on Auditing. There are regular changes, revisions and new ISA’s implemented across the audit world. A recent revision to ISA 315 is well talked about, due to the significant changes it brings to audits.   ISA 315 covers ‘Identifying and Assessing the Risks of Material Misstatement’ and the revised ISA…

Joe Fretwell
10th October 2022 SME red tape: Plans to slash ???

From Monday 3 October 2022, the UK government has changed the ‘small’ company threshold, which is expected to remove 40,000 businesses from certain reporting regulations. Since January 2016, a company qualifies as ‘small’ in the year that it does not exceed two or more of the following: Annual turnover:                                   £10.2m Gross Assets:       …

Ben Kilby
11th November 2021 COP26: Net Zero disclosures in future statutory accounts?

Arising from the current COP26 global warming conference, Sage, The ACCA and the ICC have called on urgent action to be taken to standardise and simplify carbon reporting to help SMEs join the race to Net Zero. Their new report titled ‘Think Small First’ calls on policymakers to remove the existing administrative burdens that come…

Whitings LLP
29th June 2020 Guidance on pension scheme financial reports and audit featuring Covid-19

A joint guidance has been published by ICAS, ICAEW and PRAG on pension scheme financial reports and audit, with a large focus on Covid-19 matters.   The impact of Covid-19 pandemic on the control environment of pension schemes is explored, to help auditors navigate the additional challenges they are likely to experience and help them…

Jaimie King
14th April 2020 Covid-19 and stock-take attendance

Companies that require their accounts to be audited, and hold significant levels of stock at their year-end, expect a visit from their auditors annually to perform test counts of their stock.   However, during the current lockdown, auditors are considering other ways to gain the assurance they need over the stock levels held. Some suggestions…

Jaimie King
13th August 2019 Charity accounts assurance

Whether unincorporated, a charitable company or a CIO (charitable incorporated organisation), charities are required to have certain levels of assurance over their financial statements depending on their size. The limits are much smaller than companies, meaning that many charities require some sort of external scrutiny. The requirements by size are as follows: Income up to…