Covid-19 Grant Clawback

The government backed aid and grants, namely the Job Retention Scheme and the Self Employed Income Support Scheme, announced at the beginning of lockdown, provided some welcome relief to businesses and the self employed. Three months down the line and pay outs are said to have run into the billions, so there had to have been some plan in place as to how some of this was going to be recovered.

We already know that the grant money is taxable, and is to be included on claimants 2020/21 self assessment tax return, and will be subject to Income Tax and National Insurance. However, what if HM Revenue and Customs (HMRC) consider that the grant has been incorrectly claimed?

Well, at the time of printing, the government were consulting with HMRC on amending the Finance Act to recover these grants by way of a 100% tax charge, which will be calculated along with any tax liability due on any profits generated for the 2020/21 tax year. Any repayment of the grant will be due by 31 January 2022.

This consultation is still in the draft stages, and we will update you as soon as we have further information. What is important to remember is that these grants should only be claimed if the Coronavirus crisis has had an adverse effect on your business and your business income, so you need to think carefully before claiming to avoid a large tax charge.

The content of this article is for general information only and does not constitute tax advice. It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.

Written by Ellie Hammett ACCA

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