Covid-19 support grants must be included on company tax returns

HMRC is urging tax agents and accountants to remind their clients that Covid-19 support grants or payments are taxable and should be declared on their company tax returns

The deadline for taxpayers or agents filing company tax returns (CT600) is 12 months after the end of the accounting period it covers. The deadline to pay corporation tax will depend on any taxable profits and when the end of the accounting period occurs.

If companies received taxable Covid-19 support grants or payments they should make sure it is recorded as income when calculating taxable profits.

Taxable grants include:

  • test and trace or self-isolation payments in England, Scotland and Wales;
  • Coronavirus Statutory Sick Pay Rebate; and
  • Coronavirus Business Support Grants (also known as local authority grants or business rate grants).

If a company received a Coronavirus Job Retention Scheme (CJRS) grant or an Eat Out to Help Out payment, they will need to do both of the following on their CT600 tax return:

  • include it as income when calculating their taxable profits in line with the relevant accounting standards; and
  • report it separately on their company tax return using the CJRS and Eat Out to Help Out boxes.

When furloughed employees were paid through real time information (RTI), the employer was responsible for making the usual PAYE, National Insurance contributions (NIC) and automatic enrolment deductions.

Employers must treat the grant as taxable income for corporation/income tax purposes, but can deduct employment costs as normal when calculating their taxable profits.

Myrtle Lloyd, HMRC’s director general for customer service, said: ‘We want to make sure companies are getting their tax returns right, first time, including any Covid-19 support payment declarations. Support and guidance is available on gov.uk, just search ‘file my company tax return’.’

The deadline for self assessment taxpayers to complete their 2020/21 tax return and pay any tax owed is 31 January 2022.

Last week, HMRC announced it would waive penalties for one month for late filing of tax returns and late payments. The changes mean:

  • anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file by 28 February; and
  • anyone who cannot pay their tax liabilities by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a time to pay arrangement, by 1 April.

Interest will be payable at 5% from 1 February on outstanding balances.

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