We would like to remind readers that existing legislation is in place to ensure that COVID support grants are treated as taxable income in the same way as other taxable receipts. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax.
This treatment extends to the Self-Employment Income Support Scheme (SEISS), the Coronavirus Job Retention Scheme (CJRS), the Coronavirus Statutory Sick Pay Rebate Scheme, any coronavirus business support grant scheme and any other support scheme payments.
HMRC’s guidance is clear that whether any tax is paid will depend on the business profits of the grant recipient (taking into consideration the grant and other business income and expenditure under normal tax rules), any other taxable income and personal and other allowances to which they are entitled.
The taxing of the COVID support payments is based on the fact that these payments are designed to substitute various income streams for businesses and individuals affected by the pandemic and hence should follow the same tax treatment.
HMRC also has the power to recover payments and charge penalties where claimants have made support grant claims to which they were not entitled.