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Can we avoid SEISS "voluntary" review?

State Aid distortion worries

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Hi to all! I’m wondering  -  has anybody given any thought as to how they might report all of this State Aid that our clients have received this year in next year’s Tax Return? I’m thinking that if it is entered in the existing Self-Employment schedule (e.g. as Any Other Business Income) there’s great potential for distortion and mis-understanding. In particular I am worried that Profits might well be up due to the receipt of State Aid which might “volunteer” a client for SEISS review.

Would an acceptable alternative be to have another Self-Employment schedule using the description of State Aid for the business and with a start date of 06/04/2020 and a cessation date of 05/04/2021?

Or does anybody have any other suggestions?

Replies (46)

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By Southwestbeancounter
25th Aug 2020 13:36

Presumably we'll just have to wait and see how HMRC design the 2020/21 SATR as ultimately I doubt accountants will have any say in it whatsoever.

Until then we've got plenty of other issues stressing us out, or at least I have!

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By Kaylee100
25th Aug 2020 13:58

We have to see what the tax return looks like.

If I were HMRC or the Chancellor, I would be putting separate boxes on the Tax Return, one for each of the various claims and then declaring a super profit tax rate for those who - when everything is added together - did exceptionally well from the provisions.

However, I'm not either of these - so I am waiting to see and putting all my efforts into calculating Furlough claims for the complicated!

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Replying to Kaylee100:
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By Southwestbeancounter
25th Aug 2020 14:45

The only thing is it will not always be easy to see who has done 'exceptionally well' as both SEISS grants will have to be declared on the 2020/21 SATR so for year end dates of 5 April 2021 that will fall into when the money was actually received but for those with a 30 April 2020 year end, for instance, those profits will be disproportionately enhanced. The year to 30 April 2021, however, could be a totally different story!

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Replying to Southwestbeancounter:
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By lionofludesch
25th Aug 2020 14:47

This may be a good year to change your year end.

I already have it in mind for a couple of clients.

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Replying to Kaylee100:
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By SXGuy
25th Aug 2020 16:12

Ah right. So your one of those people who thinks that no one ever, could possibly meet the criteria to claim SEISS and then find themselves between Sept and April having a better income than expected and should be punished for not having a crystal ball. Nice one.

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Replying to SXGuy:
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By lionofludesch
25th Aug 2020 16:24

SXGuy wrote:

Ah right. So your one of those people who thinks that no one ever, could possibly meet the criteria to claim SEISS and then find themselves between Sept and April having a better income than expected and should be punished for not having a crystal ball. Nice one.

[Round of Applause}

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By lionofludesch
25th Aug 2020 14:20

Duplicated.

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By lionofludesch
25th Aug 2020 14:11

Raised months ago and discussed on this forum.

I don't see it as a problem. I don't need to know for months yet.

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By lh3f9764bg1g
25th Aug 2020 15:00

I'm not so sure that this is necessarily a problem JUST for the future. I have noticed a couple of £10,000 Small Business Grants that were paid before the end of March. To my mind there's all sorts of issues raised by that that need to be considered fairly soon. Treatment in the accounts and in the Tax Returns are the two main issues and I can see potential conflicts arising between those when the year end for the accounts isn't 5th April (or thereabouts). The more I think about it . . . . . in many cases the only way of ensuring that payments (various Covd19 types of payments for varying State Aid) are dealt with in the correct Tax year will be to have a separate schedule. I can see that the body of opinion is that this isn't much of a problem but, respectfully, I feel that it is quite a dilemma and one that it would be nice to have resolved soon.

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Replying to lh3f9764bg1g:
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By lionofludesch
25th Aug 2020 16:46

Have you seen the 2020/21 Return ?

To be honest, even if there's no Special Box, it's not beyond the wit of most of us to make an adjustment on the tax comp. We've been doing it for donkeys' years with depreciation and Capital Allowances. Why not with SEISS grants ?

I can't really see HMRC sitting in their ivory towers saying "I wonder what these grants are in the 2020 accounts ?" I think they'll be aware all right.

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Replying to lionofludesch:
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By lh3f9764bg1g
25th Aug 2020 16:32

I'm aware they will be aware. I'm just worried that their algorithms won't "understand" the adjustments we will have to make. They don't exactly have a sterling recent record so-far as algorithms go . . . . . . . . . . HMRC doesn't "think" methinks and as it stands there's no way by which it would "know" "what these grants are in the 2020 accounts".

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Replying to lh3f9764bg1g:
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By lionofludesch
25th Aug 2020 16:45

You're a whittler.

There's no need.

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Replying to lionofludesch:
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By lh3f9764bg1g
25th Aug 2020 17:29

Sorry . . . . . a whittler? As insults go . . . . that's pretty weak. As for "there's no need" - no need for what? Is your reply supposed to be a reply?

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Replying to lh3f9764bg1g:
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By lionofludesch
25th Aug 2020 18:13

lh3f9764bg1g wrote:

Sorry . . . . . a whittler? As insults go . . . . that's pretty weak. As for "there's no need" - no need for what? Is your reply supposed to be a reply?

Insult ? I didn't see it as an insult so, yes, you're right, it's pretty weak. Deliberately so.

Whittle - or worry - if you wish - but "there's no need."

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Replying to lionofludesch:
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By Paul Crowley
01st Sep 2020 11:00

Whittle must be Yorkshire

To me it is carving wood with a knife, eg to make a tent peg from a stick.

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Replying to lh3f9764bg1g:
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By Chris Pittock
01st Sep 2020 10:04

I don't quite follow: (a) Why do HMRC need to know? These Grants are taxable? (b) I am sure HMRC will put in place checks to make sure that everyone who received a SEISS grant is showing the figure in their Tax Return, just like they check those that receive Child Benefit are declaring it (c) As these Grants are taxable there will not be any amendments like we do to Depreciation and Capital Allowances? Maybe I have missed the point.

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Replying to Chris Pittock:
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By lionofludesch
01st Sep 2020 10:20

Chris Pittock wrote:
(c) As these Grants are taxable there will not be any amendments like we do to Depreciation and Capital Allowances? Maybe I have missed the point.

Well, they might not be taxable in the same year as the rest of the accounting profits.

It's a bit of a pointless debate until we see the 2021 return format.

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Replying to lionofludesch:
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By lh3f9764bg1g
01st Sep 2020 11:47

But some of this funding was received before 5th April 2020 - so the debate isn't pointless, it is relevant and timeous.

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Replying to lh3f9764bg1g:
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By lionofludesch
01st Sep 2020 13:19

lh3f9764bg1g wrote:

But some of this funding was received before 5th April 2020 - so the debate isn't pointless, it is relevant and timeous.

No SEISS funding was received before May.

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Replying to lionofludesch:
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By lh3f9764bg1g
01st Sep 2020 14:51

Duh . . . . . who said anything about SEISS? We have one client who received the £10K just after 5th April but the remittance slip was dated before the 5th April. We have another client for who the remittance slip AND the £10K were received BEFORE 5th April. I'm quite sure that we are not alone in having to consider treatment now.

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Replying to lh3f9764bg1g:
Morph
By kevinringer
01st Sep 2020 15:08

I've got clients who received £10k before 5 April and some after. HMRC said use GAAP. If so, the £10k should be accrued, but over what period? I suppose we should ask what exactly was the £10k paid out for? I've got clients who continued trading and received £10k, some that are still closed who received £10k. I interpret the £10k as funding of future premises costs: rent etc. Therefore maybe it should be accrued from when the funding was announced to when the business reopened? But what about businesses that didn't close? And what about those that didn't claim until the deadline? Until HMRC issues firm guidance we're all going to be reinventing the wheel time and time again.

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Replying to lh3f9764bg1g:
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By lionofludesch
01st Sep 2020 15:09

lh3f9764bg1g wrote:

Duh . . . . . who said anything about SEISS?


Duh - I believe it was you.
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Replying to lionofludesch:
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By lh3f9764bg1g
01st Sep 2020 16:28

On 25th August I said "I'm not so sure that this is necessarily a problem JUST for the future. I have noticed a couple of £10,000 Small Business Grants that were paid before the end of March". So clearly SEISS isn't the only issue from my point of view. Furthermore it isn't even the pressing issue. All of your answers indicate to me that you feel there's no issue about all this State Aid . . . . . that it'll all be okay and we can sort it out when preparing 2021 Tax Returns . . . . . but there are unresolved issues for some 2020 Tax Returns and consideration of treatment in accounts with a year end after 5th April 2020 is also pressing.

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Replying to lh3f9764bg1g:
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By lionofludesch
01st Sep 2020 16:34

lh3f9764bg1g wrote:

On 25th August I said "I'm not so sure that this is necessarily a problem JUST for the future. I have noticed a couple of £10,000 Small Business Grants that were paid before the end of March". So clearly SEISS isn't the only issue from my point of view. Furthermore it isn't even the pressing issue. All of your answers indicate to me that you feel there's no issue about all this State Aid . . . . . that it'll all be okay and we can sort it out when preparing 2021 Tax Returns . . . . . but there are unresolved issues for some 2020 Tax Returns and consideration of treatment in accounts with a year end after 5th April 2020 is also pressing.

Ah - this is the SEISS thread. You need to start another for the other stuff.

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Replying to lh3f9764bg1g:
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By Paul Crowley
01st Sep 2020 15:54

'Hi to all! I’m wondering - has anybody given any thought as to how they might report all of this State Aid that our clients have received this year in next year’s Tax Return? I’m thinking that if it is entered in the existing Self-Employment schedule (e.g. as Any Other Business Income) there’s great potential for distortion and mis-understanding. In particular I am worried that Profits might well be up due to the receipt of State Aid which might “volunteer” a client for SEISS review.'

Last word but one

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Replying to Paul Crowley:
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By lh3f9764bg1g
01st Sep 2020 17:13

I was and am worried that the treatment of various State Aid packages could lead to misunderstandings that could lead to amounts of SEISS Grants being reviewed. The original purpose of this thread was not about SEISS as such it was about the conundrum posed by the differing ways said State Aid could be treated and the potential trouble that different interpretations might lead to - such as, as I said, potential reviews of SEISS awards. BTW SEISS isn't a word.

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Replying to lh3f9764bg1g:
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By lionofludesch
01st Sep 2020 17:22

lh3f9764bg1g wrote:
BTW SEISS isn't a word.

Neither is BTW.

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Replying to lionofludesch:
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By lh3f9764bg1g
02nd Sep 2020 10:03

Obviously not.

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By Calculatorboy
26th Aug 2020 02:16

For once i thought it would be fairly simple, additional box on 2001 sa return for seiss received on an actual basis

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Replying to Calculatorboy:
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By Southwestbeancounter
26th Aug 2020 13:38

Agreed - presumably it would be on the SE or PS pages (rather than 'other income' or elsewhere) as tax and NIC need to be levied on it.

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Replying to Southwestbeancounter:
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By lionofludesch
02nd Sep 2020 10:22

Southwestbeancounter wrote:

Agreed - presumably it would be on the SE or PS pages (rather than 'other income' or elsewhere) as tax and NIC need to be levied on it.

I assumed it'd be in the main return, since you get a combined SEISS grant to cover both self employment and partnership income. There's nothing to prevent Class 4 being charged on it, just because it doesn't appear on the SE or PS pages.

Still - who knows ? Probably not even HMRC at the moment.

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Replying to Calculatorboy:
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By Paul Crowley
01st Sep 2020 11:06

Exactly what I expect.
HMRC know what was paid and would look to make it easy to confirm, but SEISS only.
All others will be other income in the accounts.
All others are available to legal entities that are not self-employed people

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By Homeworker
01st Sep 2020 13:30

I've just been asked by a client what the maximum pension contributions she can make this year will be. She still has an April 30th year end, so her taxable income will be based on the April 2020 accounts but does anyone know if we can include the SEISS grants, which are taxable in 20/21 regardless of her year end?

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Morph
By kevinringer
01st Sep 2020 14:19

HMRC have said on the agent forum SA2020-5418 that business rates grant should be taxed on GAAP. SEISS1 is payable for businesses affected at any point prior to 13 July. For most businesses that would be mid-March to 13 July (or earlier). Logically SEISS should also be accounted for using GAAP in which case should we be accruing it for our 31 March year ends? Surely SEISS should be declared on an accounting year basis. For example business supplies services to concert venues. It is massively impacted by covid from mid-March 2020 and is expected to remain impacted until 2021. Financial year end 30 April 2020 would only be impacted by covid for 1.5 months, it is the basis period for 2020-21, the same period that SEISS1 and SEISS2 are declared. SEISS1+2 pushes the taxpayer into the higher-rate tax bracket. The following year to 30 April 2021 is hugely impacted for almost the entire 12 months and generates a loss. Surely SEISS should be matched against the periods of loss, not the fiscal year of receipt.

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Replying to kevinringer:
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By Paul Crowley
01st Sep 2020 15:01

disagree completely on SEISS.
All received ye 5 April 2021
Taxable ye 5 April 2021

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Replying to Paul Crowley:
Morph
By kevinringer
01st Sep 2020 15:04

Paul, even though SEISS is to make up for the loss of self-employed income due to covid? You still think it should not be matched against earnings (or lack of) for the period?

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Replying to kevinringer:
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By Paul Crowley
01st Sep 2020 16:13

I believe HMRC make the rules and we meekly comply.

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Replying to Paul Crowley:
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By lionofludesch
01st Sep 2020 15:06

Paul Crowley wrote:

disagree completely on SEISS.
All received ye 5 April 2021
Taxable ye 5 April 2021

That's the end of overlap relief then. We're all on 5 April year ends if that's true.

It should match up with the period of loss but HMRC said ages ago that it was going to be taxable in 2020/21. Hence the "extra box" debate.

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Replying to lionofludesch:
Morph
By kevinringer
01st Sep 2020 15:11

I agree HMRC said SEISS will be taxable 2020-21 and that is what will happen. I'm saying that logically SEISS should be matched against earnings basis periods. But when did logic come into it?

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Replying to kevinringer:
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By lionofludesch
01st Sep 2020 15:31

kevinringer wrote:

I agree HMRC said SEISS will be taxable 2020-21 and that is what will happen.

Bold statement with this U-turning Government.

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Replying to lionofludesch:
Morph
By kevinringer
01st Sep 2020 16:01

Indeed, but at least it will be a world-beating U-turn.

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Replying to lionofludesch:
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By Paul Crowley
01st Sep 2020 16:03

I believe it entirely
If HMRC want to confirm SEISS, then they would look for it in one place. Special box, 2021 return. Not sit around waiting an extra year.
This is not trading income, merely taxed and NI'd as such
Odd that nobody is suggesting all investment income should have dates changed, why should it be 5th April if I do my accounts to 30th April?

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Replying to Paul Crowley:
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By lh3f9764bg1g
01st Sep 2020 16:38

I kinda like your special box. I think things should be dealt with in the 2021 Tax Return. Imagine the problem of having a taxpayer whose year end is somewhere between 6th April and 30th April . . . . . . and lets say they receive one £10K and two SEISS payments after 3oth April 2020. Those payments wouldn't appear in the accounts until Y/e 30/04/2021 - just think, in this scenario, how far the tax can would be kicked down the road!

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Replying to lh3f9764bg1g:
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By lionofludesch
01st Sep 2020 17:15

lh3f9764bg1g wrote:

I kinda like your special box. I think things should be dealt with in the 2021 Tax Return. Imagine the problem of having a taxpayer whose year end is somewhere between 6th April and 30th April . . . . . . and lets say they receive one £10K and two SEISS payments after 3oth April 2020. Those payments wouldn't appear in the accounts until Y/e 30/04/2021 - just think, in this scenario, how far the tax can would be kicked down the road!

A special box was suggested shortly after HMRC made it clear that SEISS payments were to be taxed in 2020/21. No later than May, possibly April. If the site had a decent search facility, I'd find it for you.

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Replying to lionofludesch:
Morph
By kevinringer
02nd Sep 2020 09:32

lionofludesch wrote:

If the site had a decent search facility, I'd find it for you.

I believe the HMRC website uses the same search engine as Test and Trace ;-)
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