Treatment of COVID-19 payments and grants to self-employed people in calculating entitlement to tax credits

New statutory instrument

New regulations have been issued in relation to the treatment of COVID-19 payments and grants to self-employed people in calculating entitlement to tax credits.

In force from 25 September 2020, the Tax Credits (Coronavirus, Miscellaneous Amendments) (No. 2) Regulations 2020 (SI.No.941/2020) are designed to ensure that payments under the various coronavirus schemes and grants to support self-employed people are counted as income only once in calculating entitlement to tax credits.

The explanatory memorandum to the new regulations advises-

'This instrument corrects an anomaly in the Tax Credits (Coronavirus, Miscellaneous Amendments) Regulations 2020 which came into force on 23 May 2020. As a consequence of that instrument coronavirus support payments, including the Self-Employed Income Support Scheme, were brought into account as income for tax credits. The Finance Act 2020, which received Royal Assent on 22 July 2020, also treats the payments as income. Therefore, as a consequence of the interaction between the tax credits legislation and that Act the payments would be counted twice. This instrument removes that anomaly by counting the payments only once.'

In addition, the new regulations -

• provide for payments made under the new Department for Health and Social Care self-isolation payment scheme to be disregarded in calculating entitlement to tax credits; and
• amend the definition of 'furloughed' in the tax credits regulations to ensure that employees who are flexibly-furloughed remain potentially entitled to working tax credit.

SI.No.941/2020 is available from legislation.gov.uk