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Daily Tax Report: International

U.K. to Help Companies Struggling to Pay Tax on Covid-19 Aid

June 1, 2020, 3:58 PM

The U.K. tax office will provide support to businesses that struggle to pay taxes due on government aid provided to soften the impact of the coronavirus.

The clarification comes after the U.K. published draft legislation Saturday on how it will tax support payments. The bill confirms the government position that it will consider any support it gives businesses as part of the taxable income for the following year.

“Like with any tax due, we’ll always look to support businesses that are struggling, including through time-to-pay arrangements if appropriate,” a spokesman for Her Majesty’s Revenue and Customs told Bloomberg Tax Monday.

Time-to-pay arrangements can allow companies to delay payment of taxes until 2021.

The proposed legislation is subject to a consultation that closes June 12. It will apply to business support packages including the Coronavirus Job Retention Scheme (CJRS)—a government program to guarantee up to 80% of the an employee’s wages, capped at 2,500 pounds—and the Self-Employment Income Support Scheme (SEISS), which gives a similar government guarantee to the self-employed.

Individuals eligible for SEISS can claim a taxable grant worth 80% of their average monthly trading profits, paid out in a single installment covering three months’ worth of profits, and capped at 7,500 pounds in total.

As of May 24, the CJRS has been used by 1 million employers, covering the wages of around 8.4 million jobs, with the total value of claims worth 15 billion pounds ($18.6 billion). The SEISS has so far seen 2.3 million claims worth 6.8 billion pounds.

“We’ve been clear the grants are taxable, like other taxable receipts, from the start and this has been in guidance. The aim of the legislation is not to increase tax receipts but to confirm that amounts are taxable,” the HMRC spokesman said.

Taxes will also be due on business support grant payments made to small and medium businesses that have been hit hardest by the government-imposed lockdown measures.

Check out Bloomberg Tax’s country-by-country roadmaps covering direct and indirect tax developments.

To contact the reporter on this story: Hamza Ali in London at hali@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Vandana Mathur at vmathur@bloombergtax.com

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