Tax Treatment of Covid 19 Grants

Tax Question

I’ve had a number of clients tell me that they believe government grants such as the SEISS grants in respect of Covid 19 are not taxable, is this correct?

If they are to be declared how is it done? And are there any penalties if it’s not reported?

Tax Answer

A common misconception is that the various government grants relating to COVID 19 are not to be treated as taxable income however the payments follow GAAP rules with the exception of SEISS payments which falls into the tax year when it is received.

All Coronavirus Support Payments are revenue in nature.  Where these payments are related to a trading business they are to be brought into account in calculating the profits of that business with liabilities for individuals for by the 31st January following submission of the self-assessment and for companies 9 months from year end.

For a partnership if the SEISS grant is brought into the partnership account it is treated as the partnerships taxable income with partnership profit shares being declared as per the partnership agreement, if it is paid direct to a partner it is declared only on that partners tax return.

An individuals self-assessment and companies CT600 provide separate boxes to enable any overclaimed SEISS or CJRS payments to be repaid if HMRC hasn’t already been contacted to arrange a repayment. With any overclaims not reported and paid back subjected to penalties of up to 100%.

HMRC have provided a manual BIM40456 which provides further guidance on support payments.

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