Share this content

Grants received during 2020-2021

Which grants if any are not taxable

Didn't find your answer?

Client received a single grant from the Arts Council which he understood to be not taxable from an email they sent him. However, his tax return, though received by HMRC, has not been captured. Could it be because of the unreported grant? A fellow recipient of the grant has received confirmation from HMRC on Twitter that the grant is not taxable and my client is naturally reluctant to submit an amended return including the grant in taxable income. 
This was HMRC Customer Support's response:

Thank you for waiting. The guidance provided in the parliament written question is correct. If the grant is not for a specific project it will not be taxable. Najmin
I am unsure what my advice to my client should be. 

Replies (9)

Please login or register to join the discussion.

avatar
By David Ex
19th Jan 2022 23:02
Thanks (0)
Replying to David Ex:
avatar
By sammerchant
20th Jan 2022 10:00
Thanks (0)
avatar
By jonharris999
20th Jan 2022 07:01

There are a couple of things going on here and some potential for confusion.

1. The taxable-or-not status of the ACE Emergency Recovery Fund for Individuals (and while we're at it, the Creative Scotland Hardship Fund):

David has posted the link to the first important item here, which was a parliamentary answer implying that these grants were not taxable. However this was expressly superseded by HMRC (see the BIM manual pages on Covid support). "Najmin" has a bit more homework to do.

For now, my advice is to include these amounts in Box 10 of SES1, include as taxable, and add WSN explaining what you've done and giving notice that you'll come back later if there is further guidance later.

2. I have not heard of how confusion about this could lead to a return not being captured, and it seems very unlikely that this issue could have anything to do with that problem. UTR's don't necessarily have to be given to ACE on grant applications and ACE don't routinely send all grant data to HMRC unless they are asked to in specific cases.

Thanks (0)
Replying to jonharris999:
avatar
By sammerchant
20th Jan 2022 10:03

I called HMRC after the Return had been in limbo for four days and was told that it was the second case the officer had had that day. She thought it was to do with the SEISS Grants. I checked that I had declared the maximum receivable as received. However, my client did receive a small grant from the Arts Council and I did wonder whether that was the cause of the holdup.

HMRC told me to expect a definitive answer by 14 February 2022 !!

Thanks (0)
avatar
By jonharris999
20th Jan 2022 12:45

By way of a PS, this issue has completely blown up on HMRC's Twitter feed last night and this morning, with several correspondents pointing out the inconsistency and asking for a clarification.

Thanks (2)
avatar
By sammerchant
20th Jan 2022 16:25

Sorry! Duplicate post.

Thanks (0)
avatar
By sammerchant
20th Jan 2022 16:24

HMRC have now walked back their initial view, leaving many disgruntled taxpayers.

See https://twitter.com/derekbond/status/1484148342225608709?s=21

Couldn't find their *rs*s using both hands!

Thanks (0)
avatar
By Catherine Newman
20th Jan 2022 17:49

I've had a similar case. West Oxon offered business people grants of £10K and the recipients were led to believe they were tax free. I rang my client and asked why she had put in her cash book (MTD eat your heart out!) that it was tax-free. She said her neighbour had applied for it and it was so good they applied for it. Just before Christmas my client rang them up and they were told it was meant to be tax-free but isn't.

On another issue I have a client who received a training bursary to train as a TA. That is definitely tax-free as I had to look it up today.

Thanks (0)
avatar
By jonharris999
20th Jan 2022 20:03

A truly ridiculous saga, made most ridiculous of all by the remark we make below:

"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."

Here is the full summary we've posted on social media.

****

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 exceptionally difficult months. It is wholly unacceptable that they should have been subjected to this ridiculous and wholly avoidable uncertainty.

Thanks (2)
Share this content