BEWARE THE TAX ON COVID-19 SUPPORT

tax

 

Eligible businesses should by now have accessed any available government support to help reduce the financial implications of the pandemic. Whilst such support is welcomed, businesses need to make sure they understand the tax implications of any support provided.

 

 

 

The following government assistance is classed as taxable income and will normally need to be reported in the accounts on the date of receipt:

 

  • Self-employed income support scheme (SEISS)
  • Local authority business grants

 

There can be a significant delay in the associated tax on the government support falling due e.g. where a business has a March accounts date, and SEISS income was received in June 2020, that will be included in the March 2021 accounts, with any associated tax not falling due until January 2022.

 

Reimbursements through the furlough scheme should be reported in the accounts to match the period in which the wage costs were incurred for example, if the accounts date is 31 March 2020 and a furlough reimbursement was received in May 2020 to cover March and April wages, the part for March wages would need to be included in the March 2020 accounts, with the balance reported in the March 2021 accounts.

 

Any income from government backed loans, such as the bounce back loans, are not classed as taxable income. Tax relief will be available on any interest charges, but no tax relief is available on the capital repayments.

 

Lentells are able to provide support on all aspects of business and personal tax. For further advice or information please contact your local Lentells office:

Chard - 01460 64441, chard@lentells.co.uk

Seaton - 01297 20584, seaton@lentells.co.uk

Taunton - 01823 286274, taunton@lentells.co.uk