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Taxation of covid support payments

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The Taxation of Coronavirus Support Payments Regulations, SI 2021/92, bring payments under the following Covid support schemes within the scope of taxation as ‘coronavirus support payments’ under FA 2020 s 106:

  • test and trace support payment scheme in England;
  • self-isolation support grant in Scotland; and
  • self-isolation support scheme in Wales.

The schemes provide payments to self-employed individuals who have been asked to self-isolate, and the regulations ensure those payments are treated as part of their self-employment income.

FA 2020 Sch 16 para 3 provides that payments made to an individual under the self-employment income support scheme (SEISS) are referable to the individual’s business. The regulations modify para 3 so it reads as if payments under the three above support schemes (or a coronavirus business support grant scheme) are referable to the business of the recipient of the payment (with similar adjustments where the recipient is a partner in a partnership).

Schedule 16 para 8, which excludes payments under certain schemes from being liable to a 100% income tax charge where the recipient of the payment was not entitled to it, is modified to cover payments under the three schemes.

The changes made by the regulations are drafted as ‘modifications’ to Sch 16, rather than the more usual ‘amendments’. This reflects the regulation-making power given by s 106(3) which does not include the power to amend Sch 16 itself. This treatment allows for changes to adapt the legislation to new schemes as they are announced rather than requiring primary legislation in a Finance Bill.

The regulations have effect retrospectively, in relation to payments made both before and after 22 February, the date on which they come into force.

Issue: 1518
Categories: News