Taxation of coronavirus (COVID-19) government support payments
Taxation of coronavirus (COVID-19) government support payments

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Taxation of coronavirus (COVID-19) government support payments
  • Which business support grants are within the scope of these provisions?
  • How are the grants to be brought within the charge to tax?
  • CSPs that are referable to a business
  • CSPs that are not referable to activities of a business that is being carried on
  • What is a business and what amounts are ‘referable’ to it?
  • Amounts referable to a business or business activities—interaction between paragraphs 1 and 2
  • Amounts referable to a business—specific situations
  • Exemptions, reliefs and deductions
  • Charge on CJRS payments where employment costs are deductible by another
  • More...

During the coronavirus (COVID-19) pandemic, the UK government announced a series of measures to support individuals and businesses that are adversely affected by the pandemic. A number of these measures involve the receipt of funds directly from government or local government that are not expected to be paid back, ie grants rather than loans. For more detail on the schemes announced, see Practice Note: Coronavirus (COVID-19)—tax implications.

Guidance relating to these schemes has always indicated that the recipients should treat these grants as taxable income because the grant is, in effect, replacing the income of the recipient that would otherwise have arisen.

In order to bring this into law, on 1 June 2020, the government published draft legislation, tax information and impact note and explanatory notes for consultation. The legislation ultimately made its way into section 106 of and Schedule 16 to Finance Act 2020.

The purpose of the legislation is to:

  1. ensure that the grants are treated as income where the business is within the scope of income tax or corporation tax

  2. enable HMRC to recover payments to which the recipient was not in fact entitled, and

  3. enable HMRC to charge a penalty for deliberate non-compliance

Which business support grants are within the scope of these provisions?

The provision applies to ‘coronavirus support payments’ (CSPs). This is defined in Finance Act 2020, s 106(2). It includes

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