Accounting for government financial support during the Coronavirus pandemic

24th June 2020

Many companies have been receiving financial support from the government during the Coronavirus pandemic, either through the furlough/job retention scheme, rates relief or grants.

 

The technical advice

 

Under UK accounting standards, income from the government should be recognised under one of two models, based on the nature of the grant as follows:

 

  1. Accrual model – the grant is either a revenue or capital grant (relates to revenue costs or capital assets). Most COVID-19 government support relates to revenue costs. They are recognised in income over the period to which they relate
  2. Performance model – where no conditions are attached on the grant, it is recognised in income when it is received. Where there are specific conditions attached related to future performance, it is recognised only when these conditions are met (when there is certainty that the income is due/belongs to the entity). If the conditions have not yet been met it will be recognised in creditors as deferred income

 

COVID-19 support

 

Coronavirus Job Retention Scheme (Furlough) – CJRS

The income is received in relation to a certain months’ payroll costs. Therefore it should be recognised in the same period as the payroll costs. It should be classified as other income. Use the accrual model.

 

Business rates relief

This is not a grant from the government (no money is received) – instead there is just a break on business rates i.e. no cost in the accounts. Continue showing any rates which are paid in the P&L as a cost, the cost for the year will be less if you have benefitted from rates relief. Nothing is included in income for this.

 

Small Business Grants Fund & Retail, Hospitality and Leisure Grant Fund

At the point of receiving the grant, the company’s eligibility would have already been established, as such any conditions have been met. It can be immediately recognised in other income when it is received, in line with the accrual model. (See FRS102 s.24.5E, which appears to have specific wording on this sort of scenario, where immediate financial support is provided, to use the accrual model)

 

Other items in Blogs
Ruth Pearson
23rd June 2022 Changes to National Insurance

In April 2022 we saw Employee’s National Insurance Contributions increase by 1.25% from 12% to 13.25%, as part of the Governments Health and Social Care levy. Employer’s National insurance also increased from 13.8% to 15%. From April 2023, the health and social care levy will be paid separately to National Insurance and become a tax…

James Selby
23rd June 2022 Pensions Contributions: Maximise tax relief

We are seeing more and more cases of individuals missing out on claiming higher rate tax relief on their employee pension contributions especially where they are not in self-assessment and required to file tax returns.   Where employers have enrolled their staff to make employees pension contributions via a ‘relief at source’ scheme, the contributions…

Paul Jefferson
14th June 2022 VAT Penalty Changes

A new penalty regime will come into effect for VAT periods starting on or after 1 January 2023. The changes will impact the charges for missing VAT filing and payment deadlines and will be replacing the current surcharge system. These changes place continued importance on being up to date with your VAT returns, aware of…

Liz Simpson
13th June 2022 NIC: All Change!

HMRC Changes to the National Insurance contributions for 2022-2023 tax year, are you confused? Due to the COVID-19 strain on the NHS, the government announced that they would be increasing the National Insurance contributions by 1.25% as a means to increase spending on health and social care. The Health and Social Care Levy was applied…

Jaimie King
10th June 2022 30-Jun-22: Covid Recovery loan deadline approaching

Time is running out for businesses to apply for Recovery Loans, the follow on Covid-support product from the CBILS.   In order to qualify for the Recovery Loan Scheme (RLS), your business has to have been affected by Covid-19 and you have to apply and have received the funds by 30th June 2022. The RLS…

Stephen Malkin
7th June 2022 Virtual Finance Officer: Outsource your book-keeping to us

Following the increase in use of cloud accounting software’s like Xero, QuickBooks and Sage over the past few years, businesses have never been better positioned to look to outsource their accounting function.  For all businesses, getting the accounting function working efficiently can be challenging, as you will need potentially different people with different skills: someone…