When the government announced the Self-Employment Income Support Scheme (SEISS) as a response to the coronavirus pandemic, it was met with sighs of relief by many self-employed people.
Open to sole traders and those in partnerships, it provided grant income to help see people through, what turned out to be, more than one lockdown.
Of course, this innovative scheme also meant that accounting professionals had to help many of their clients with the application process. And now, there’s the small matter of correctly reporting the grants on Self Assessment tax returns.
So, how do you need to go about reporting the SEISS grant? And what do you need to do to make the SA season go as smoothly as possible?
The SEISS scheme has had five different payment tranches. It was designed to give the self-employed and those in partnerships a lifeline through the lockdowns. For many people, the grants brought welcome relief as they faced several months without any income.
In all, there were five payment rounds beginning on 13th May 2020, with the final payment round closing for applications on 30th September 2021. People could claim up to £29,250 across all five rounds.
This means that in practice you may find you have clients who weren’t eligible for rounds 1 to 3 of SEISS, but could claim tranches 4 and 5. Due to the way that the grants were calculated, clients may not have been eligible for the maximum award each time.
Initially, the SEISS grants were to be included in the Self Assessment return in the tax year 2020-21. This was understandable as the first three releases of SEISS were all in that tax year, and nobody envisaged the need for further payments.
The government amended the rules in the 2021 finance bill, and the grant should now be reported in the financial year in which it was received. Meaning that the accounting professional’s life has been made a tiny bit easier!
Grants 1 to 3 will be in the 20/21 return, whilst 4 and 5 sit in the 21/22 return.
HMRC have now amended the online submission process to prepopulate the return with any information about SEISS grants they already hold.
However a note of caution here!
There have been reports of errors in the process that have caused double counting, or even inflation of grants into the millions of pounds!
HMRC say that these have now been fixed, and they will check every return to ensure that the SEISS figures entered tally with their own records. They will then make any corrections required, and inform the client or their agent.
But we’d suggest a belt and braces approach to make sure that your clients don’t end up with double taxation on something which was meant to help them out.
Self-employed sole traders will include their SEISS grants in their Self Assessment return, and HMRC has included new questions about this.
The grant should not be included as income for the year or entered in box 16 of the SA103f (other taxable income). Instead, the figure needs to be entered into box 70.1. If the grant receipt is entered into box 16 then this could cause the auto-population to double count the grant.
Whilst the position for a self-employed person is relatively easy, for partnerships it is slightly more complex. Essentially it boils down to who received the grant in the first place.
A member of a partnership
Someone who applied as a member of a partnership, and then received the cash into their bank account for their own use, will include it in their Self Assessment return in the same way as the self-employed example above.
The partnership itself
Where a SEISS application was made on behalf of the partnership, and the cash was received into the partnership accounts, then the individual must not include it in their own submission (SA104S and SA104F).
Instead, it should be added to the partnership income and then distributed according to the partnership agreement, and included within the Turnover (sales) boxes 3.24 or 3.29 on the Partnership tax return (SA800).
In all cases, there is an additional declaration to complete at the end of the submission. This should only be ticked if the support was in the form of SEISS, rather than an employer’s furlough payment for example.
The new declaration states: “I declare that I have included all coronavirus support payments that I have received (such as Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme) as taxable income when calculating profits in the period of this return.”
The SA season is something of a fraught time for many practices. We know that whilst advice is all well and good, individual clients can prove to be somewhat ‘interesting’ to work with.
We all know that getting information from some people is like getting blood from a stone. But, this year there’s the extra consideration that the government is levying penalties where people have incorrectly claimed SEISS.
However, if you are able to correct an error early or make an adjustment on the submission, then the penalties may be reduced or withdrawn altogether. (It might also be time to look into a more collaborative approach to working with clients on their records).
Communication is the key here
- Make sure you have information and blogs on your website
- Use as many channels as possible to point people to relevant articles and information
- Have a full understanding of the scheme so that you can quickly answer any questions.
- Set up an SEISS FAQ section so that people can self-serve information. You’ll still be helping clients, whilst cutting down the number of calls you receive.
- It may also be worth sending out a pre-emptive email so people are thinking about SEISS (and of course their SA returns) so that the whole issue doesn’t come as a complete shock.
You may also want to contact any clients that have previously taken advantage of the full trading allowances, to make sure that they’re aware they may need to deliver an SA return this year.
If you are looking to expand your practice then this is an excellent opportunity to do so, and steal a march on your competitors into the bargain.
If the whole SEISS issue seems like a real pain, then the good news is that this is probably exactly what your competitors, and more importantly your potential clients, will be thinking.
So embrace the opportunity, and put together some marketing materials that will encourage people to get in touch. With MTD on the horizon and SEISS reporting to think about, it may be just the time to supercharge your marketing and harvest a whole host of new clients.
You can bet that with many practices burying their head and not wanting to engage with the issue, a proactive and knowledgeable accountant can certainly prove they are the practice to be with.
Are SEISS grants classed as turnover?
No. The SEISS is grant finance and not revenue, so it is not treated as turnover for tax or VAT purposes for individuals. However, for partnerships that receive the grant, it will be treated as part of the taxable income of the partnership.
HMRC have confirmed that traders who breach the VAT threshold upon receiving the SEISS grant will not be required to register.
Is an HMRC SEISS grant taxable?
Yes. The grant forms part of the taxable income of the individual or in some circumstances, the partnership.
How many SEISS grants have there been?
There have been a total of five editions of the SEISS grant.
What dates were SEISS grants paid?
There were five separate rounds of SEISS grant payments.
|Round||Opening Date||Closing Date|
|1||13th May 2020||13th July 2020|
|2||17th August 2020||19th October 2020|
|3||29th November 2020||29th January 2021|
|4||21st April 2021||21st June 2021|
|5||29th July 2021||30th September 2021|
Is the SEISS grant subject to national insurance?
Yes. The SEISS grant is subject to National Insurance Contributions.
Do clients have to pay the SEISS grant back?
In most cases no, the grant is not repayable. Where an individual has subsequently become ineligible, or has claimed in error, then the 2021 finance bill included the requirement for this to be paid back.
Does this affect the Trading Allowance?
In some cases, yes. Where clients earn less than £1,000 and have no other income, ordinarily they would not need to complete a Self Assessment return. But, if they receive the SEISS grant then they will need to do so whether they breach the £1,000 limit, or not.
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