Draft legislation: Taxation of coronavirus (COVID-19) support payments

HMRC is inviting views on the technical effectiveness of this measure, which ensures that grants within the legislation are subject to tax. These grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax. Whether or not any tax is paid will depend on the business profits of the grant recipient (taking into account the grant and other business income and expenditure under normal tax rules), any other taxable income they may have and their personal and any other allowances to which they are entitled.

The consultation closes on 12 June 2020.

The legislation will apply to individuals, businesses, individual members of a partnership and employers who receive or apply for a payment from:

  • Self-Employment Income Support Scheme (SEISS)
  • Coronavirus Job Retention Scheme (CJRS)
  • the Small Business Grant Fund (SBGF), the Retail, Hospitality and Leisure Grant Fund (RHLGF), the Discretionary Grant Fund (DGF), or their parallel schemes in the devolved administrations
  • other payments made by public authorities to businesses in response to COVID-19
  • any other COVID-19 support scheme specified or described in regulations made by the Treasury

The measure provides for a delegated power to make provision about its application to a particular grant scheme.

It will also give HM Revenue and Customs (HMRC) powers to recover payments to which recipients were not entitled to under the Self-Employment Income Support Scheme or the Coronavirus Job Retention Scheme payment or where a Coronavirus Job Retention Scheme 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. Further provisions may be included in the final new clause and schedule when tabled.

Subparagraph 5 provides that where income tax is charged under paragraph 6(1), the exemption and income condition for charitable trusts in sections 527 and 528 of
Income Tax Act (ITA) 2007 will have effect as if paragraph 6(1) were a provision to which section 1016 of that Act applies.

Therefore it is hoped that where grants paid to charities are taxable usual corporation tax exemptions would apply and mean no tax was payable, but you would always be encouraged to seek professional advice to confirm your own position. Where appropriate returns may be required.