COVID-19 Support - Make sure you account for it properly!
The COVID-19 pandemic hit the world hard. Businesses were shut, jobs were lost and lockdowns were implemented by governments around the world.
In response, COVID-19 economic support packages were provided to stem the financial impact of COVID-19. In the UK, the government provided a comprehensive package ranging from business loans to income support amongst a number of other measures.
There are still various COVID-19 measures in place, check here to see if you or your business are eligible.
Reporting COVID-19 Grant and Support Payments
If you have received some form of COVID-19 support, you may need to report this to HMRC. This is because it could form part of your taxable income.
The Self Employment Income Support Scheme (SEISS), which started in May 2020, needs to be declared on your self-assessment. See here [PUT LINK IN] for more information about your self-assessment tax return.
The SEISS application and the payment windows for the 2020/21 tax year were:
- SEISS 1 - 13 May 2020 to 13 July 2020
- SEISS 2 - 17 August 2020 to 19 October 2020
- SEISS 3 - 29 November 2020 to 29 January 2021
HMRC data shows that more than 2.7 million people claim at least one SEISS payment up to 5th April 2021. If you received at least one of these payments, you will need to declare the amount on your self-assessment tax return. HMRC is strictly checking this point and re-adjusting tax returns automatically if the payments have been declared properly.
In respect of the Coronavirus Job Retention Scheme (CJRS), the payments received by businesses will again need to be declared in the accounts and corporation tax return as additional income, thereby liable to corporation tax. <
If you took out a coronavirus business loan (such as the Bounce Back Loan Scheme or the Coronavirus Business Interruption Scheme), the loans will need to be accounted for on your balance sheet as a liability. The interest paid on these loans will, in most cases, be tax-deductible.
It is important to check with your advisor on how the COVID-19 grant/support payments should be treated, especially for tax purposes.
Disclaimer: The information in this article is based on our understanding of tax law at the time of publication. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this article. If you’re looking for reliable financial advice, look no further than Apex Accountancy.
References:
1. A. Tera, C. Marc, H. Vivian, COVID-19 in the United Kingdom Assessing Jobs at risk and the Impact on People and Places, McKinsey & Company, accessed January 4, 2022 <https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-19-in-the-united-kingdom-assessing-jobs-at-risk-and-the-impact-on-people-and-places>
2. Don’t forget to declare COVID-19 grants on your tax return, Government of United Kingdom, accessed January 4, 2022 <https://www.gov.uk/government/news/dont-forget-to-declare-covid-19-grants-on-your-tax-return>
3. Don't Forget to Declare COVID-19 Grants on your Tax Return, Island Echo, accessed January 4, 2022 <https://www.islandecho.co.uk/dont-forget-to-declare-covid-19-grants-on-your-tax-return/>
4. GoSimple Tax 2021, International Association of Bookkeepers, accessed January 4, 2022 <https://www.iab.org.uk/do-i-need-to-file-a-self-assessment-tax-return-and-what-if-ive-received-a-covid-19-grant/>
5. Accounting Glossary, Free Agent, accessed January 4, 2022 <https://www.freeagent.com/en/glossary/self-assessment/>
