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2020-21 SEISS and cash basis

sideways relief available?

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As we know small self employed traders often use the cash basis for their Tax Return declarations. Many have made losses on their businesses this tax year and have claimed SEISS.
SEISS income is taxable but I'm not sure it will be classed as business income for the purposes of loss relief. Will they be able to claim their 2020/21 business losses sideways against the SEISS income without going to the lengths of moving to the accruals basis? (I realise that SEISS income may be covered by personal allowances anyway but what if not?)
I have my doubts about the availability of sideways relief under such circumstances but am interested in others’ thoughts.

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By Paul Crowley
25th Jan 2021 13:41

Who cares until we see the tax return and HMRC approved calculations are fed into the software.

They will be wrong as usual, HMRC do not seem to be able to cope with tax calculations at the lower level when all the reliefs are active.

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By lionofludesch
25th Jan 2021 13:47

I vote no.

I thought about whether SEISS was business income for the purposes of pensions and decided that it wasn't actually business income. I reckon loss relief will be the same. Carry forward relief only or change to accruals.

On the other hand, the implication of HMRC's announcements suggests that SEISS will go on the self employment (or partnership) pages.

I'd welcome clarity. From the pension point of view, within the next few weeks, so that financial advisers can get cracking.

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Replying to lionofludesch:
By taxinfo
25th Jan 2021 14:48

Similar to my thoughts too. Like you I want clarity for planning.

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By richard thomas
25th Jan 2021 17:46

I've done the heretical act of reminding myself what the actual legislation says:

"FA 2020 Schedule 16
Accounting for coronavirus support payments referable to a business
1 (1) This paragraph applies if a person carrying on, or who carried on, a business (whether alone or in partnership) receives a coronavirus support payment that is referable to the business.
(2) So much of the coronavirus support payment as is referable to the business is a receipt of a revenue nature for income tax or corporation tax purposes and is to be brought into account in calculating the profits of that business—
(a) under the applicable provisions of the Income Tax Acts, or
(b) under the applicable provisions of the Corporation Tax Acts."

Thus any loss in the trade or business can only arise after bringing the SEISS payment into account.

But if you are on the cash basis you cannot have sideways relief anyway. Fortunately that is not relevant.

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