Is my COVID 19 payment business income or other income?

DS2020

I work in a partnership, we both received the 80% self employed covid-19 payment. I need to know how I deal with this payment for my book-keeping. Is this income in to the business or classed as other self employed income not related to the partnership?

DS2020

To clarify, do I need to put this into the business bookkeeping and accounts or will each partner instead add it to their personal tax return?

[Deleted User]

When you say you are paid "the 80%", are you paid via PAYE?

DS2020

No it's a self employed partnership.

[Deleted User]

If you mean the SESS grant then it has nothing to do with the business book keeping, it will be on your Self Assessment Tax Return under the "other income" section. It is a grant, but it is taxable. 

DS2020

Thank you, that is what I had guessed but I couldn't find the information anywhere. 

Jeremy535897

MadMattUK said:

If you mean the SESS grant then it has nothing to do with the business book keeping, it will be on your Self Assessment Tax Return under the "other income" section. It is a grant, but it is taxable. 

It's never quite as simple as it seems. Draft legislation says:
"Schedule (Taxation of coronavirus support payments)
(1) This paragraph applies if a person carrying on, or who carried on, a business, (whether alone or in partnership) receives a coronavirus support payment that is referable to the business.
(2) So much of the coronavirus support payment as is referable to the business is a receipt of a revenue nature for income tax or corporation tax purposes and is to be brought into account in calculating the profits of that business—
 (a) under the applicable provisions of the Income Tax Acts, or
 (b) under the applicable provisions of the Corporation Tax Acts.

1 Taxation of coronavirus support payments
1(1) Schedule (Taxation of coronavirus support payments) makes provision about the taxation of coronavirus support payments. (2) In this section, and in that Schedule, “coronavirus support payment” means a payment made (whether before or after the passing of this Act) under any of the following schemes—
 (a) the coronavirus job retention scheme;
 (b) the self-employment income support scheme;
 (c) any other scheme that is the subject of a direction given under section 76 of the Coronavirus Act 2020 (functions of Her Majesty’s Revenue and Customs in relation to coronavirus or coronavirus disease);
 (d) a coronavirus business support grant scheme;
 (e) any scheme specified or described in regulations made under this section by the Treasury"

On the face of it then, the amount is a receipt of the business it is referable to, which would be the partnership in this case. But then you have:
"3(2) A coronavirus support payment made under the self-employment income support scheme is referable to the business of the self-employed person to whom the payment relates.
(3) Where an amount of a coronavirus support payment made under the selfemployment income support scheme is brought into account under Schedule — Taxation of coronavirus support payments 5 paragraph 1(2), the whole of the amount is to be treated as profits of the tax year 2020-21.
(4) An amount of a coronavirus support payment made under the selfemployment income support scheme that relates specifically to a partner of a firm is not to be treated as a receipt of the firm if the whole of the amount is retained by the partner rather than being distributed amongst the partners.
(5) Accordingly—
 (a) the receipt is not to be included in the calculation of the firm’s profits for the purposes of determining the share of profits or losses for each partner of the firm (see sections 849 to 850E of ITTOIA 2005 and sections 1259 to 1265 of CTA 2009), and
 (b) the receipt is then to be added to the partner’s share"

The explanatory notes to that last bit say:
"22. Subparagraph 2 states that a payment made under the SEISS is referable to the business of the individual to whom the payment relates.
23. Subparagraph 3 states that where a payment made under the SEISS is brought into account under paragraph 1(2), the whole of the amount is treated as profits of the tax year 2020-21.
24. Subparagraph 4 applies where a payment made under the SEISS that relates specifically to an individual partner of a firm is retained by that partner in its entirety. It provides that the payment is not referable to the business of the firm.
25. Subparagraph 5 provides for the treatment of the payment where paragraph 3(4) above applies. The payment is added to the partner’s share of the partnership’s profits and is excluded from the calculation of the partnership’s profits."

It is of course still all draft. Bet you wish you'd never asked. See:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/888810/Taxation_of_coronavirus_support_payments_-_draft_new_clause.pdf
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/888811/Taxation_of_coronavirus_support_payments_-_draft_explanatory_note.pdf

[Deleted User]

Jeremy535897 said:

It is of course still all draft. Bet you wish you'd never asked. 

Sometimes, with legislation yes, but then I read the sodding Brexit bills!
I am half expecting them to create a new section on the 20/21 self assessment for "SEISS Grant" just to simplify the process. 

Jeremy535897

MadMattUK said:

Jeremy535897 said:

It is of course still all draft. Bet you wish you'd never asked. 

Sometimes, with legislation yes, but then I read the sodding Brexit bills!
I am half expecting them to create a new section on the 20/21 self assessment for "SEISS Grant" just to simplify the process. 

The Brexit bills weren't too bad as a lot of it was stuff nobody but civil servants cared about (their pension rights). The hardest bit was finding the clauses that mattered. They created something special for universal credit on SEISS, so perhaps they will do the same for tax returns. Whatever they decide, they will want to ensure the figure is factored into profits for class 2 and 4 NIC.

DS2020

Oh wow that's a lot to read and absorb. Thank you for the information. 

HeidyD

It is an income that we will pay back after all this crazy period... Don't you think so?