We warned last year that there would be confusion about the Emergency grants taxable
status…nice of HMRC to leave it to 10 days before the deadline to let everything blow up on
Twitter.
An 'as-quick-as-we-can, promise' review of the sorry saga of the taxable status of two Covid-19 grants in the arts.
This concerns two particular grants which you may have been fortunate enough to receive in the
summer of 2020:
The Arts Council of England (ACE) Emergency Response Fund for Individuals
Creative Scotland Hardship Fund
Most Covid business support grants are taxable. Most 'hardship' support for individuals is not taxable. This led to a perfectly understandable question from recipients, their advisers, and advice services such as the excellent one provided by Equity to its members, about whether or not these particular grants were taxable.
In July 2020, the Work and Pensions minister told parliament that the grants were not taxable
In the course of the following year, HMRC reviewed all its advice about Covid-19 grants and provided written advice to ACE and to Equity to the effect that the grants were taxable
On 19 Jan 2022, HMRC's customer service Twitter feed told an enquirer that the grants were not taxable, referring back to the parliamentary answer
The same enquirer was tweeted again on 20 Jan 2022 and told that he'd been given the wrong answer. They were taxable.
Moments later, another Tweeter was told that the customer service feed didn't know, and would give an answer later.
And moments after that, the same enquirer was told that they were taxable.
So here we have the State telling the public that the grants are not taxable, then that they are, then that they aren't, then that they are, then that they don't know, and then that they are.
Our advice about this matter to recipients is now as follows:
If you received the grant, you should treat it as taxable income for your 20/21 return.
If you have already filed your return and treated it as not taxable, you should amend your return and resubmit it. Unfortunately this may mean that you need to pay more tax than you thought you did. You should, in this case, complain to HMRC about the trouble and difficulty you have been caused, and we consider it likely (though of course we can't be sure) that HMRC will pay you a £30 or £50 apology payment.
Whether you are making a new return or an amended return, you should include an additional note in the text box provided, to the effect that you have included the grant as taxable but consider that this is the incorrect treatment and that, if there is a future reverse in the decision, you intend to submit an amendment in future.
It seems virtually certain that there will be taxpayers who treat the grants as not taxable, in good faith, because they happened to receive one of the many incorrect or contradictory pieces of advice from the state. If there is any attempt in future to penalise these taxpayers they should resist any such penalty vigorously. We consider that they would have an obvious and extremely strong defence against penalty and, if they are ever assessed for unpaid tax, they should be granted long interest-free periods to repay.
This is, of course, a most unsatisfactory state of affairs. The recipients of these grants, fortunate though they were in one sense to receive them, are businesspeople who have been through exceptionallydifficult months. It is wholly unacceptable that they should have been subjected to this ridiculous and wholly avoidable uncertainty.
If you have any problems or questions: call us for free advice on 08000 487626, message us on
Instagram @accounting4actors or email hello@accounting4actors.co.uk . Our advice about Covid
financial questions is free and always will be.
Please visit accounting4actors.co.uk and find out about tax for actors, accounting for creative and cultural industry professionals, actors’ tax returns, and all accounting for creatives.