Taxation of coronavirus (COVID-19) support payments


  1. Which business support grants are within the scope of these provisions?
  2. How are the payments taxed?
  3. Recovery provisions where the schemes are incorrectly used

Measures setting out the taxation treatment of coronavirus (COVID-19) support payments are included in FA 2020.

In summary, these measures:

  • ensure that the grants are treated as income where the business is within the scope of income tax or corporation tax
  • enable HMRC to recover payments to which the recipient was not in fact entitled, and
  • 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), which include:

How are the payments taxed?

The amounts received are subject to tax in various different ways depending on the context. Most of the provisions relate to persons who are carrying on a ‘business’, which includes a trade, profession, vocation, UK or overseas property business and a business consisting wholly or mainly of making investments. Therefore, companies and individuals that are carrying on a business, whether alone or in partnership, must treat any CSP that is referable to their business as a receipt of a revenue nature for corporation tax or income tax purposes and must bring it into account in calculating the profits of that business in the usual way.

Where the business has ceased probably because of coronavirus, and if there was a trade or property business, the CSPs should then be treated as post-cessation receipts. If the business was not a trade or property business, the person is to be treated as if they were still carrying on the business and the CSP must be chargeable to tax as described in the paragraph above. For details on post-cessation receipts, see the Other adjustments to profits guidance note.

Any business expenses that would have been deductible in calculating the profits of the business if it had been carried on at the time of the receipt are allowable against the amounts brought in as taxable, but they are not allowed as deduction if they are expenses that arise directly or indirectly from ceasing to carry on the business.

A payment made under the CJRS or the SSP rebate scheme is only a receipt of the business of the person entitled to the payment as an employer. This covers the situation where the person operating the PAYE scheme is a different person to the actual employer of the employees.

A CSP made under the SEISS is referable only to the business of the self-employed person to whom the payment relates and is to be treated entirely as income of the tax year 2020/2021 (and no element included in 2019/2020, even though the SEISS was announced during 2019/2020 and some of the affected trading may have taken place in that year).

In addition, a CSP made to a partner under SEISS is not to be treated as a receipt of the firm if the whole CSP is retained by the partner and not shared among the partners.

There are specific exemptions and reliefs for mutual trades, charities and community amateur sports clubs that receive CSPs, but the trading allowance cannot be used against CSPs received ― see the Trading allowance guidance note.

Any deductions for pre-trading employment expenses are disallowed where a CSP is made under the CJRS or the SSP rebate scheme.

Where a CSP is made under the CJRS or the SSP rebate scheme but is not chargeable as described above, and another person is entitled to deductions in respect of the employment costs to which the CJRS claim relates, the person receiving the CSP will be charged to income tax even if it is a company.

Recovery provisions where the schemes are incorrectly used

HMRC will have the power to recover CSPs under the CJRS or SEISS through the tax system where the support schemes have not been used as intended. The provisions bring in an additional charge to income tax even if the recipient was a company chargeable to corporation tax that paid corporation tax on the original receipt of the CSP. The legislation provides HMRC with the powers to recover payments, by imposing a 100% tax charge, from anyone who has received a payment to which they are not fully entitled or anyone who has not used a CJRS payment to pay employee costs, PAYE, NIC and make pension contributions.

The legislation requires a person who is subject to a charge to income tax to notify that liability to HMRC within 90 days of the income tax becoming chargeable or 90 days of 22 July 2020, ie Royal Assent of Finance Act 2020 (whichever is later). HMRC can charge a penalty for failure to notify in the context of deliberate conduct only.

Where a company is insolvent, HMRC can issue notices that make individuals connected to an insolvent company jointly and severally liable for the tax liabilities dealt with under these rules where there has been a deliberate act to claim or retain amounts under the CJRS.