There have been a variety of supports and grants provided by the government to businesses throughout the pandemic. These supports, such as TWSS, EWSS, CRSS and restart grants were intended to defray costs incurred by the business. Consequently, the supports received should be taxable. The costs that they were used to pay would in turn be deductible.
For example, the receipt of the TWSS would be taxable, but the payment of the TWSS to an employee would be tax-deductible. Where all of the supports received were paid out then the effect should be that taxing the support is tax neutral.
From an accounting perspective, the support received will be offset against the expenditure to which it related, thereby reducing the expense in the company accounts. The net cost to the business would be reflected in the accounts.
Where a grant or support was received in respect of capital expenditure, the cost of the capital expenditure is reduced. This reduces the cost of the capital item for capital allowance purposes.
It is important that businesses track how a grant or support is spent as whether it is accounted for in one period (revenue expenditure) or over a longer time (capital expenditure) will impact the final tax computation.
If you’d like assistance with this matter please don’t hesitate to contact our team.