The government announced in the budget on 3 March 2021 that there would be a fourth and fifth grant payable under the Self Employment Income Support Scheme (SEISS).
The fourth grant covers the 3-month period; February to April 2021 and the fifth grant is expected to cover the 5-month period from May to September 2021.
The closing date for claiming the fourth grant was 1 June 2021, so claims should already have been made for this one but more detail on making your claims in general can be found in my last article on the subject here.
Paying tax on the grant income
All SEISS grants are liable to tax and class 4 National Insurance.
They are taxable at the date of receipt and therefore the first, second and third grants will need to be included on your 2020/21 tax return. The fourth and fifth grants will be included on your 2021/22 tax return. This is regardless of your accounting year-end.
You therefore need to ensure details of all grants received are provided to us for inclusion on your tax return.
Depending on your accounting year-end, this may lead to more taxable income in the 2020/21 tax year than you are expecting.
For example, if you normally prepare your accounts to September each year, profits from your accounts for the year to 30 September 2020 (12 months), will be included on your 2020/21 tax return as normal plus the first, second and third grants.
This means that you will be paying tax in the 2020/21 tax year based on a full 12 months trading results plus the first three support payments.
I would therefore urge you to make sure you get your accounts and 2020/21 tax return completed early, to ensure you have as much notice as possible of your upcoming tax bills.
Anyone preparing their accounts to 31 March or 5 April, will be less affected by this.
Have you claimed incorrectly?
The 2020/21 tax return also includes a new section on it entitled “incorrectly claimed Coronavirus support payments”. If you feel you have claimed a grant that you weren’t entitled to, there is scope to declare and repay this on the return.
It is being widely reported in the press that HMRC will be looking at claims and conducting enquiries into returns. It is therefore important that you consider this when providing us with your return information, and if you have any concerns about the claims you have made please do raise this with your usual point of contact and we can review your case for you.
However, it is important to note that the rules for the third grant onwards state that you do not need to apply hindsight or repay the grant as long as you sensibly considered all factors when looking at your projected position at the time of claiming.
What this means is that if you have fully considered the position at the time you made the claim and concluded that you met the criteria, if circumstances have changed since this time, or perhaps you weren’t affected as badly as first thought, you would not have to repay any grants claimed.
This is a complex area and as time passes, I’m sure more information about the approach HMRC is going to take regarding what they consider to be overclaims will become clearer and we will keep you updated on this.