Firms may still be taxed even if they return furlough money
Businesses may still be taxed on the furlough scheme funds they receive even if they return the cash to HMRC.
At the start of the coronavirus lockdown the government introduced the job retention scheme, which pays 80 per cent of salary costs for furloughed staff.
Last week Chancellor Rishi Sunak announced the “job retention bonus” programme to encourage companies to bring back workers was among a raft of measures designed to kickstart the economy.
Sunak said employers who take back furloughed workers until the end of January will receive a £1,000 handout.
However some firms have decided they now do not need the money they received through the furlough scheme and have considered returning.
However law firm Pinsent Masons has said due to the way legislation working its way through Parliament has been drafted, they will still be taxed on the money even through they have given it back.
Legislation in the finance bill states the furlough money is treated as if it were a trading receipt of the business, not a grant. This is to ensure there is no upside for the employer, but it does not cater for the money being given back voluntarily.
Jason Collins, Partner and head of Litigation, Regulatory and Tax at Pinsent Masons, said: “The Furlough Scheme has paid out over £25bn in claims. There are plenty of employers out there who took the money but have now worked out that they can survive without it, and so want to take the pressure off the public purse and give the money back, entirely voluntarily.”
“However, they appear to be the victim of a gap in the draft legislation. It is hoped that the government will fix this slip before the draft legislation becomes law.”
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