Businesses: What Covid Payments are Reportable for Tax Purposes?
The Coronavirus Job Retention Scheme (CJRS) was the UK government’s key business support measure during the first 18 months of the pandemic in this country. The furlough scheme enabled employees to remain employed on reduced remuneration, funded in part by the state, and enabled business to stave off closure where financially possible.
The CJRS finally ended on 30 September 2021 and businesses need to turn their attention to what payments should be disclosed on their tax returns, if they have not already done so.
It is important to remember that payments made under the CJRS, as well most other payments and grants made under temporary government measures, are taxable by HM Revenue & Customs, as they amount to ‘reportable payments’ for tax purposes.
What amounts to a reportable payment?
The government has clarified what is a reportable payment and should, therefore, be declared on tax returns by the self-employed, by partners and by companies. In the context of covid-related business payments and grants, the following are reportable:
· CJRS payments
· Payments under the self-employment income support scheme (SEISS)
· Test and trace or self-isolation payments CJRS
· Eat Out to Help Out payments
· The coronavirus statutory sick pay rebate
· Payments by way of coronavirus business support grants, by local authorities or by devolved administrations. Eg from small business grant fund, retail, hospitality and leisure grant fund and the economic resilience fund in Wales, and the pivotal enterprise resilience fund in Scotland.
These payments may be reportable as income on an individual’s tax return, a company tax return or on a partnership return. Other than SEISS payments (which go in the Self Employment Income Support Scheme Grant box on the self-assessment form) all other payments and grants are to be inserted in the ‘any other business income’ box.
However, bounce back loans and coronavirus business interruption loan scheme payments are not treated as support payments, and therefore do not have to be reported to HMRC.
It is important to ensure that any declarations of reportable payments are made accurately to avoid the potential implications of making an incorrect tax return and questions raised by HMRC.
Commercial lawyers may not, depending on whether they are FCA regulated, provide clients with tax advice other than generic advice; and an accountancy or tax professional may need to be consulted if you need advice or clarification.
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