On 29 May 2020, Government published a consultation on draft clauses to the Finance Bill 2020 “Draft legislation: Taxation of coronavirus (COVID-19) support payments”.
- The legislation ensures that grants made under the Coronavirus Job Retention Scheme (CJRS) and Self-Employed Income Support Scheme (SEISS) are within the scope of tax and included as revenue for income tax and corporation tax purposes.
- This will apply to the following support payments:
- CJRS,
- SEISS,
- Any other scheme that is the subject of a direction given under section 76 of the Coronavirus Act 2020 (functions of Her Majesty’s Revenue and Customs in relation to coronavirus or coronavirus disease),
- A Coronavirus Business Support Grant Scheme; and
- Any scheme specified or described in regulations made under the draft legislation by the Treasury.
- 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.
- 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.
- HMRC will have additional compliance and enforcement powers in relation to the CJRS and SEISS in order to recover payments in 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 have the power to recover payments, by imposing a 100% tax charge, from anyone who has received a payment under the Schemes to which they are not fully entitled or anyone who has not used a CJRS payment to pay employee costs, PAYE, NICs and make pension contributions.
- HMRC will charge a penalty if an individual’s behaviour is considered to have been deliberate.
- The provisions give HMRC powers to make an officer of an insolvent company jointly and severally liable for the Income Tax charge raised in relation to any CJRS payment to which the company was not entitled or any CJRS payment which was never intended to be used to pay employee costs, PAYE, NICs and make pension contributions in certain circumstances.
- The measure will be monitored through information collected from tax returns, receipts and compliance activity.
- The measure will have effect from Royal Assent of the Finance Bill 2020.
- The consultation will close on 12 June 2020.
View the consultation here.
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