HMRC is holding a two-week consultation on the technical effectiveness of legislation to introduce rules on the taxation of coronavirus business support grants, which will be included in Finance Bill 2020
The new clause and schedule are intended to ensure that particular grants to help businesses, employers and individual partners of partnerships affected by the coronavirus crisis are treated as taxable income, and are within scope of either income tax or corporation tax.
This includes payments made under the Coronavirus Job Retention Scheme (CJRS), the Self-Employment Income Support Scheme (SEISS) and other business-supporting grant schemes announced by the government and the devolved administrations.
For grants made under the CJRS, the recipient of the grant is taxed if the employees are working in a UK taxable business (to ensure that any deduction for employee expenses met by the grant is matched by taxation of the grant covering those expenses). Grants paid under the CJRS in respect of employees not working for a business are outside the scope of tax.
For grants made under the SEISS, the recipient of the grant is taxed on the amount as if it were profits of the trade to which it relates in the 2020-21 income tax year.
The provisions provide that where, as is expected to be the case in most circumstances, the SEISS grant is retained by the individual partner (and does not feature in the firm’s calculation of partnership profits) the grant is treated as taxable income of the partner alone, rather than of the partnership.
The provisions also provide HMRC with additional compliance and enforcement powers in relation to the CJRS and SEISS, in order to recover payments to which recipients were not entitled. These powers can also be used in circumstances where a CJRS payment has not been used to pay employees, make pensions contributions, pay PAYE or National Insurance contributions.
HMRC will be able to do this by raising income tax assessments or requiring taxpayers to submit a self assessment tax return.
HMRC will also be able to charge a penalty in cases of deliberate non-compliance.
The measure does not legislate for the operation of any of the Covid-19 support schemes.
The consultation closes on 12 June.
Draft legislation: Taxation of coronavirus (Covid-19) support payments