For those of you familiar with Dante’s Inferno, you will be aware of the seven deadly sins of Wrath, Sloth, Lust, Greed, Pride, Gluttony and Envy.
We have just read a great article written by Rebecca Cave, the consulting tax editor for Accounting Web, from 4th February 2022, which gives a new slant on the seven deadly sins, this time relating to the subject of SEISS grant income, which many taxpayers have been able to access through the last year to help them survive the various COVID-19 lockdowns and horrendous trading climate.
We have quoted below the seven deadly sins relating to SEISS, as stated by Rebecca Cave in her article, which you can find at
https://www.accountingweb.co.uk/tax/personal-tax/seven-deadly-sins-of-seiss-traps-to-avoid
“Sin 1: Not telling the accountant
Taxpayers had to claim the SEISS grants themselves through their own government gateway, as tax agents were locked out of the claim portal ……. The knock-on effect is that accountants don’t have details of the SEISS grants their clients have claimed, and clients may not realise this.
The taxpayer may forget to tell their accountant … that they received some government support.”
“Sin 2: Not on the tax return
There is a persistent myth that the SEISS grants are not taxable – they are. The funds are taxable in the year in which they were received, and are also liable to class 4 NIC, and class 2 NIC if the taxpayer has not already reached the small profits threshold for class 2.
The first three grants were paid before 6 April 2021, so they must be declared on the taxpayer’s 2020/21 tax return.”
HMRC created new boxes on the return forms to report grants from the various coronavirus support schemes, [with the SEISS income declared in a separate box from the “any other income” or “support payments such as CJRS” boxes].
“Sin 3: Incorrect tax return declaration
If the total value of SEISS grants declared on the 2020/21 tax return doesn’t match SEISS grants one to three, which HMRC believes it paid out to that taxpayer, the tax authority will automatically correct the self assessment tax calculation ….. It’s important to check this HMRC amendment as it could be wrong. If HMRC has corrected a grant that the taxpayer says they did not receive, its possible the individual’s tax identity has been misused to submit a fraudulent SEISS claim.”
“Sin 4: Ignored for benefit claims
Taxpayers who claim the state benefits, such as working tax credits or universal credit, need to include the amounts of SEISS grants received as part of their trading income figures on their benefit claim, but they may not realise they have to do this.”
“Sin 5: Claimed as an employee
This is quite difficult to do, as the taxpayer had to report some self-employed income on their tax return for 2018/19 in order to claim any of the first three SEISS grants.
However, if the trade was incorporated in 2019/20 or 2020/21, HMRC may not realise that the self-employed trade had ceased, and would allow the SEISS claim to be processed.
Many taxpayers do not realise that as a director of their own company they are not self-employed, but they are actually employed, and don’t qualify for the SEISS.”
“Sin 6: Payments on account
As the SEISS grants form part of the 2020/21 tax assessment, the grants received will influence the level of tax payments on account demanded for 2021/22 (payable by 31 January and 31 July 2022). …… 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. The taxpayer (or tax agent) can apply to reduce the payments on account for 2021/22 through their personal tax account online service or a paper form SA303.”
“Sin 7: Repayment to wrong account
Taxpayers can voluntarily repay SEISS grants, and if they do so, they should only declare the amount of the SEISS retained on their tax returns.
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.
Anyone repaying SEISS grants should keep a careful record of exactly what was repaid and when.”
Our thanks to Rebecca Cave for this great article. If you think you may have inadvertently committed one of these seven sins, please let us know so that we can take the appropriate action to correct it.
