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.

Link: SEISS – A dangerous legacy

Many UK businesses are already benefitting from the temporary tax relief offered by the super-deduction. However, many more could still be missing out on this vital support.

The super-deduction tax relief scheme was introduced on 1 April 2021 and runs until 31 March 2023. 

It allows firms investing in qualifying plant and machinery assets to benefit from a 130 per cent first-year capital allowance.

This allows companies to cut their tax bill by up to 25p for every £1 they invest. Most companies also benefit from a 50 per cent first-year allowance for qualifying special rate (including long life) assets.

Thanks to the super-deduction, companies can claim allowances of 130 per cent on most new plant and machinery investments that ordinarily qualify for main-rate writing down allowances, such as:

• Compressors
• Computer equipment and servers
• Electric vehicle charge points
• Foundry equipment
• Ladders, drills, cranes
• Office chairs and desks
• Refrigeration units
• Solar panels
• Tractors, lorries and vans

Businesses can claim a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances. 

Special-rate investments include:

• Parts of a building considered integral – known as integral features
• Items with a long life
• Thermal insulation of buildings

You must purchase new assets to benefit from the relief, not second hand or refurbished equipment. 

The relief is also only available to incorporated companies. Unincorporated businesses, such as partnerships and sole traders, can benefit from the Annual Investment Allowance (AIA). The AIA permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million until March 2023.

Here is an example provided by HM Revenue & Customs (HMRC) on how the super-deduction works:

• A company incurring £1 million of qualifying expenditure decides to claim the super-deduction
• Spending £1 million on qualifying investments will mean the company can deduct £1.3 million (130 per cent of the initial investment) when computing its taxable profits.
• Deducting £1.3 million from taxable profits will save the company up to 19 per cent of that – or £247,000, which is 19 per cent of £1.3 million – on its Corporation Tax bill.

The AIA remains available alongside the super-deduction for incorporated businesses as well. Organisations must review how they use these schemes together to maximise the tax relief available.

Do you need guidance on how to utilise the super-deduction tax relief? Contact our tax team today. 

Link: Super-deduction

Employers submit a P11D form to HM Revenue & Customs (HMRC) at the end of every tax year.

A P11D outlines the benefits or expenses you have provided to your employees outside of their wages. 

You must submit a P11D form by 6 July following the end of the tax year. At the same time, you must give your employees a copy of their P11D form and tell HMRC the total amount of Class 1A National Insurance you owe. 

If you do not complete the P11D on time or correctly, it could lead to penalties. You may also get charged additional penalties and interest if you are late paying HMRC.

Do I have to complete a P11D each year? 

Unbeknownst to many employers, you can now deduct and pay tax through your payroll. Therefore, you do not have to produce a P11D each year. 

You can do this as long as you register with HMRC before the start of the tax year (6 April) to let them know that you intend to payroll staff benefits. You can do this online here.

If you choose to payroll your benefits, the cash equivalent of the employees’ benefits gets added to their taxable pay and charged to them through the real-time payroll process. 

Many employers find this system much easier as they do not have to produce yearly P11Ds. However, you must calculate the Class 1A National Insurance contributions and complete form P11D(b) by 6 July. 

If you miss the registration deadline, you can ask HMRC to informally payroll benefits. You must still complete the P11D form and mark each report as “payrolled”. HMRC should then stop collecting tax already deducted from your employees. 

As well as producing detailed reports, the benefit of using this system is that employee tax is collected in real-time rather than through tax code adjustments in the following tax year.

However, this approach may not suit your business so seek professional advice from your accountant. If you have any questions, please call our payroll team here. 

New Year, new career? Many people lost their jobs during the pandemic or decided to take a new career journey by setting up a new business. We take a look at the start-up trends for 2022. 

Whether it is a full-time endeavour or a part-time side hustle, people are looking for ways to make extra income to cope with the current living cost crisis. 

As we move forward from the COVID-19 pandemic, it is in the government’s interest to improve our economy and offer help to business owners. 

Insurance broker, Simply Business has delved into data and has revealed the latest trends for business start-ups and the self-employed. 

With 68% of small businesses confident for the year ahead, are you ready to leap into self-employment and set up a new business?

Craft stall

Did you know that the fastest-growing small business trade in 2021 was craft stalls, with a 237 per cent growth compared to 2020?

So take your lockdown hobby of making candles, ceramics or clothing and turn your talents to selling your wares. The demand for craft businesses continues to rise and could be a venture worth pursuing. 

Market trader

Do you enjoy working outside and chatting with customers? With changing COVID restrictions, outdoor businesses are thriving. 

Market trading was the second-fastest-growing small business idea in 2021, with a 113 per cent increase.

Online retailer

Although UK high streets are struggling, online retailers are booming. In 2021, the number of new online retailers grew by 62%. 

With platforms like Etsy and eBay, it is now easy for retailers to start selling. 

Photographer

Freelance photography increased in the UK by 56% in 2021.

Do you love a wedding and taking pictures? With the number of weddings increasing significantly this year because of years of postponements, now could be the ideal time to launch your freelance wedding photography business!

Handyman or handywoman

Are you fed up with the sight of the same four walls? Over the past two years, we have all spent too much time indoors because of the pandemic. Unsurprisingly, many have found issues with the current state of their homes and have looked to make improvements or upgrades. The result has seen an increase in demand for repair people, with a 44% rise in businesses in 2021.

Catering

Have a passion for cooking, throwing parties or events?

With catering businesses growing by 39% in 2021, you find starting a catering company the perfect option for this year.

Teaching/tutor

The education sector was hit hard during the pandemic. If you have teaching experience, a tutoring business could be for you. Research by Simply Business shows that a 21% growth was seen last year in this sector. 

Home baking

Are you a fan of GBBO (Great British Bake Off)? 

Have you perfected your banana bread? Do you know your filo from your shortcrust? Your cooking and baking skills could prove you additional income. 

The number of UK home baking businesses saw an increase of 24 per cent between 2020 and 2021.

Dog walking

Millions of Brits have bought pets since the start of the pandemic.

The demand for pet walkers is now higher than ever. New dog walking businesses have increased by 22 per cent year on year. Could you turn your love for dogs into a profitable business?

Whatever your business sector, Wilder Coe can help you start up and grow. Whether you need help with choosing your company structure, require accounting support or want tax advice, give us a call on 020 7724 6060.