The Self-Employment Income Support Scheme, or SEISS, was part of the Government’s unprecedented financial support package introduced to help UK businesses struggling during the Covid-19 pandemic. Whilst payments under the scheme were grants as opposed to loans, and did not need to be repaid, they were subject to income tax and national insurance contributions.
Many taxpayers failed to appreciate that SEISS grants were taxable and did not include them on their tax returns. Others included them in the wrong place. As a result, significant numbers of taxpayers completed their tax returns incorrectly and paid the wrong amount of tax.
To clarify matters, HMRC has issued guidance explaining the tax position of SEISS grants, the correct procedure regarding their inclusion on tax returns and the steps borrowers must take to remedy any incorrect returns.
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What is SEISS?
SEISS was introduced to support self-employed individuals whose businesses suffered during the pandemic. The scheme comprised five grants paid out between May 2020 and September 2021, and potential borrowers needed to satisfy specific eligibility criteria to qualify. The criteria included that a borrower’s profits from their self-employed activities were £50,000 or less, and were equal to, or exceeded, those made through any employment. Applicants also had to confirm that their business had been negatively affected by the pandemic, because they could not work due to having to self-isolate or shield, for instance.
What is the HMRC guidance concerning SEISS and tax returns?
The relevant HMRC Guidance is entitled ‘Check if you need to change your Self-Assessment return for SEISS.’ The Guidance states that taxpayers should check their Self-Assessment tax returns if they have already submitted their 2020-2021 return online, and claimed an SEISS grant before 6th April 2021.
You must refer to the complete HMRC Guidance to ascertain if it applies to you and, if so, the steps you need to take. You can find the Guidance here.
In brief, the Guidance states as follows.
- SEISS grants received under the first three grants (up to 5th April 2021) should have been included on your 2020 to 2021 tax return, and the appropriate box was the one relating to Self-Employment Income Support Scheme Grants. HMRC are correcting any returns it identifies as having reported SEISS grants incorrectly.
- If you used the correct box to report your SEISS grants but the sums stated did not tally with HMRC’s records, HMRC adjusted your tax return and provided a revised tax calculation. If you disagree with the updated calculation, you must contact HMRC.
- If you reported SEISS payments in the wrong box or boxes, you must update your return, removing the SEISS income from the incorrect boxes. If you don’t, you will be charged tax and national insurance twice.
- If you omitted SEISS on your tax returns but HMRC’s records show that you received payments under the scheme, HMRC added the amount in accordance with their records and sent revised tax calculations. You should have paid any tax owed by 31st January 2022.
- If you did not need to submit a self-employment or partnership page with your tax return for 2020-2021, you were not eligible to receive support under the SEISS scheme. If HMRC’s records show that you erroneously received SEISS grants, HMRC will have added those payments to your tax return and sent you a revised tax calculation. The Guidance explicitly states that HMRC expects to recover any SEISS payments made to ineligible recipients. If you were eligible for SEISS but forgot to submit the relevant page, you must update your return to include them.
If you disagree with any of HMRC’s changes, you must inform them within 30 days from the date of the letter SA302 advising you of the corrections.
Given the speed with which the Government’s Covid-19 financial support schemes were implemented and the unprecedented circumstances in which businesses used them, numerous problems have subsequently arisen. These include applicants claiming support to which they were not entitled, either through mistake or fraud, businesses using the funds for incorrect purposes and borrowers struggling to repay loans amidst ongoing economic turmoil.
If you need advice or assistance with any problems arising from the Government’s Covid-19 schemes, our HMRC team is here to help. We regularly assist clients to resolve issues arising from Covid-19 financial support packages, ranging from difficulties repaying bounce back loans to alleged Covid-19 fraud. We will tailor our advice to your specific commercial circumstances and strive to settle the issue with minimal impact on your business.