Over the past two years, thousands of taxpayers benefited from the Self-Employment Income Support Scheme (SEISS) before closing in September 2021.
The scheme, involving five grant payments, was set up by the Government to support the self-employed, for example, sole traders, who met specific eligibility criteria.
As HM Revenue & Customers (HMRC) looks to claw the money back, taxpayers may face potential pitfalls. HMRC warn that many individuals may misunderstand the rules.
Payment difference
If you received more than you were entitled to, you must tell HMRC.
The tax office expects you to report this without further prompting.
Accountants in the dark
As taxpayers claimed grants through their Government Gateway portals, many accountants and tax agents may not have the full details of the SEISS grants.
Therefore, many self-employed workers did not receive the necessary advice regarding their tax implications for this year.
Taxpayers should immediately make their accountants aware of the situation if they have claimed so that it can be incorporated into tax calculations and reporting.
Claims not showing on the tax return
The first three grants were paid before 6 April 2021, so they should have been declared on the taxpayer’s 2020/21 tax return.
HMRC created new boxes on the return forms to report grants and so the self-employed needed to be particularly careful to include the SEISS grants in the box relating to the self-employed grants, not the box for ‘any other income’ or ‘support payments such as CJRS’.
Incorrect declaration on tax return
If the total value of SEISS grants declared on the 2020/21 tax return did not match SEISS grants one to three, which HMRC believes it paid out to that taxpayer, it has confirmed that it will automatically correct the Self-Assessment calculation.
When you receive or assess your tax bill it is important to check in case HMRC has corrected or included a grant.
The tax authority has said some individuals’ tax identities may have been misused to submit a fraudulent claim.
Payments on account
The system assumes the taxpayer will receive at least the same amount of taxable income in 2021/22 as in 2020/21. But the SEISS grants received in 2021/22 are likely to be lower as a maximum of £15,000 could be received in that year compared to a cap of £21,570 in 2020/21.
As a taxpayer, you can apply to reduce the payments on account for 2021/22 through the personal tax account online service or a paper form SA303.
It is important to note that the SEISS grant should not generally be included in the turnover of the business for the period.
Making payment into the wrong account
You can also tell HMRC if you want to voluntarily pay back some or all of the grants you received. You can do this at any time.
The SEISS repayment has to be made to a specific HMRC bank account set up for the purpose and be accompanied by the grant claim reference. The taxpayer should not repay the grant into their Self-Assessment tax account.
For help and advice on SEISS taxation, please seek professional advice and contact our team today.
