Investment Income: Taxation

Treasury written question – answered on 17th November 2020.

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Photo of Henry Smith Henry Smith Conservative, Crawley

To ask the Chancellor of the Exchequer, if he will provide support to people who receive income via company dividends that are taxed, during the covid-19 outbreak.

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

Dividends are not covered by the Coronavirus Job Retention Scheme (CJRS) or the Self-Employment Income Support Scheme (SEISS) Grant Extension. Income from dividends is a return on investment in the company, rather than wages.

Those who pay themselves a salary through their own company are eligible for the CJRS. The CJRS is available to employers, including owner-managers, and individuals paying themselves a salary through a PAYE scheme. Where furloughed directors, including companies with a sole director, need to carry out particular duties in order to fulfil their statutory obligations, they may do so provided it is no more than would reasonably be judged necessary for that purpose.

As with the previous SEISS grants, it is not possible for HM Revenue and Customs (HMRC) to distinguish between dividends derived from an individual’s own company and dividends from other sources, and between dividends in lieu of employment income and as returns from other corporate activity.

This means, unlike the SEISS grants that use information HMRC already hold, targeting additional support would require owner-managers to make a claim and submit information that HMRC could not manageably verify to ensure payments were made to eligible companies for eligible activity.

The SEISS Grant Extension continues to be just one element of a comprehensive package of support for individuals and businesses. This package includes Bounce Back loans, tax deferrals, rental support, and other business support grants. The Government has also temporarily increased the Universal Credit standard allowance for 2020-21 by £20 per week and relaxed the Minimum Income Floor, so that where self-employed claimants' earnings have significantly fallen, their Universal Credit award will have increased to reflect their lower earnings.

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