is the Small business rate relief grant counted as taxable for universal credit claims

Hesel18

I have searched the internet and nowhere is the information available as to the taxable status of the SBRR grant, My wife and myself have a shop which as had to temporarily shut due to Coronavirus, therefore we are now getting Zero income, I have started a Universal Credit claim but when I need to fill in my self employed income form for the month is the SBRR grant counted as taxable.

If this is the case We will get no UC at all for probably the next 4 months, meaning we will be forced to use the grant money just to live which is not the intended purpose of this grant, it is supposed to be needed to pay my ongoing business expenses not to live on, if I have to use it to live on my business will fail.

Jeremy535897

You should assume that it will be. Grants for capital purposes are normally not taxed, although they reduce expenditure for capital allowances purposes. Grants in respect of income are taxable. Grants not for specific purposes are described as undifferentiated receipts and are normally taxable as income. It is a pity neither the outline of the grant, nor the detailed guidance (version 3) seem to mention tax.

calcotti

OP. Like you I can find no guidance on this. However for UC I wonder if it is treated as capital rather than income. If so it is clearly intended for the business and would therefore be a business asset and business assets are disregarded when working out UC entitlement.

i’m sorry I can’t find anything definite.

Jeremy535897

ADM H2 on capital disregards relating to business assets is not that helpful:
"Meaning of business assets
H2022 Business assets include standard items such as machinery, vehicles, fixtures and cash held in the bank (including money held following the sale of assets). They may also include items such as customer lists and contacts, current and future contracts and goodwill.
H2023 In the event of their sale, assets may result in an income or capital receipt. A sale of an asset such as “work in hand” may result in an income receipt and so would be appropriate for inclusion in the profit and loss account. Where doubt exists as to whether a particular asset would represent a capital or income receipt upon its sale, the principles of commercial accounting must be applied i.e. the approach that would be taken by an accountant or the HMRC to such a receipt or holding."
Not quite on point I agree, but it does suggest that in this area UC rules follow tax rules (if the grant is undifferentiated I think most accountants would write it off to income). Still, it's a rather abstruse point.

calcotti

I think the bit you have highlighted relates to the sale of a physical asset. The grant will simply be money in the bank. 

However I’m flying blind ...

Jeremy535897

If it could be capital for UC could you argue the self employment grant was capital for UC? Once either grant is paid if it just goes into a personal bank account could it then be treated as savings?

calcotti

Jeremy535897 said:

If it could be capital for UC could you argue the self employment grant was capital for UC? Once either grant is paid if it just goes into a personal bank account could it then be treated as savings?

The SE grant is based on self assessment income tax returns so it seems to me this is personal income (earnings replacement).
The Small Business Support Grant, if I’ve understood it correctly, is based on business rates so is clearly business related.

It also occurs to me that the SBSG is clearly a one off payment.
By contrast the SE Support Payment is actually calculated as a monthly amount for a three month period, albeit that it appears that it will be paid as a single payment. The implication is that if the government were to extend the scheme they could make monthly payments if they chose to.

Not saying this is right, just trying to construct an argument.

Jeremy535897

An interesting argument and well worth using in the case of a dispute. My other concern was that many people with small businesses just have a personal bank account. If it has £6,000 in it and it suddenly gets another £7,500 in it, that in itself could cause a problem in that the savings level would reduce UC. If you got a £10,000 grant as well, that could wipe out the UC for quite a while?

ljwhitehouse

Also in the same position... Sole trader, universal credit joint claim (with my partner) made and approved but likely eligble for the small business support grant which may arrive in the next week within the initial assessment period Of the start date of my claim and the 26th April.

How is income classed in universal credit? Income vs expenditure? I know it sounds greedy, but the grant is intended to support business (pay my units rent, maybe invest in equipment to support my business)... so if the money was spent within this assessment period. Hence the income from the grant reducing to nothing. Would myself and partner then still be entitled to the universal credit.

It is likely if not, that our benefits will stop and we will be forced to both live of my business support grant.
We are both sole traders and have been self employed for 11 years but I am the only one who is eligible for this small business support grant.

JooLion

First timer here, sole trader, in receipt of working and child tax credits, and housing benefit as we rent privately. We live hand to mouth, one child is disabled too. My profit 19/20; £8880, lower 2 previous years. I'm eligible for the £10k grant, as have small business rate relief and rent premises. My question is; If I apply and the £10k lands in my business account next week, IS, it classed as taxable income, thus lowering my tax credits, and housing benefit? Thought it a Business Grant. I scrape by year on year and the £10k could possibly 'increase' my earnings this year so we won't be in receipt of these benefits, and will I will start paying more tax next year? Will we be expected to live off the £10k, I also have business rent and bills to pay too? Confused! Help somebody :-)

Jeremy535897

JooLion said:

First timer here, sole trader, in receipt of working and child tax credits, and housing benefit as we rent privately. We live hand to mouth, one child is disabled too. My profit 19/20; £8880, lower 2 previous years. I'm eligible for the £10k grant, as have small business rate relief and rent premises. My question is; If I apply and the £10k lands in my business account next week, IS, it classed as taxable income, thus lowering my tax credits, and housing benefit? Thought it a Business Grant. I scrape by year on year and the £10k could possibly 'increase' my earnings this year so we won't be in receipt of these benefits, and will I will start paying more tax next year? Will we be expected to live off the £10k, I also have business rent and bills to pay too? Confused! Help somebody :-)

It is likely that the small business grant will be regarded as income of the business for tax credits purposes, but we do not know for sure.