HMRC has launched a consultation on draft clauses to the Finance Bill 2020.
The legislation will apply to individuals, businesses, individual members of a partnership and employers who receive or apply for a payment from the Self-Employment Income Support Scheme (SEISS), the Coronavirus Job Retention Scheme (CJRS), the Small Business Grant Fund (SBGF), the Retail, Hospitality and Leisure Grant Fund (RHLGF), the Discretionary Grant Fund (DGF), or their parallel schemes in the devolved administrations, and other payments made to businesses in response to COVID-19.
Key measures set out in the consultation will:
- confirm that grants within the legislation are subject to tax and will be treated as income where the business is within the scope of either Income Tax or Corporation Tax.
- provide HMRC with the power to raise Income Tax assessments to recover amounts from the recipient of a SEISS or CJRS payment to which they are not entitled or where a CJRS payment has not been used to pay furloughed employee costs.
- enable HMRC to charge penalties in cases of deliberate non-compliance/fraudulent claims.
Explanation from our professional body the ICAEW’s Tax Faculty
The ICAEW (The Institute of Accountants in England and Wales)’s Tax Faculty has explained that it is HMRC’s intention is to levy a 100% tax charge (with the regular tax charge being dis-applied) in a manner which is independent of the self assessment tax return (although there will be an opportunity on the tax return to declare liability to the recovery charge) in the case of deliberate non-compliance.
The Tax Faculty also understands that HMRC is looking for SEISS grants, which were correctly paid to be taxable on receipt in 2020/21, irrespective of the business accounting date and with no allocation of any part of the grant to March 2020.
How will HMRC police compliance?
Whilst this has not yet been outlined it would appear that the focus for the CJRS may be on whether a specific employee was included in an RTI report filed prior to 19 March 2020, rather than, for example, the amount claimed or whether the employee is not working.
For the SEISS it is also likely that HMRC will run reports to pick up cases where the individual did not continue to trade on a self-employed or partnership basis at least throughout 2019/20.
The Finance Bill 2020 is currently making its way through parliament and we will be back in touch once we have further news.
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