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Self Employment Income Support - Which Tax Year?

A single payment but does this need to be apportioned between Tax Years

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I am considering the completion of some Trading Accounts for the years to 31st March 2020 and 5th April 2020 but cannot see any directions yet as to which year the (taxable) Self Employment Income Support Grant will fall into. Will it be required to split the payament into months (March, April & May) allocating March to 2019/20 and April & May (and perhaps June) to 2020/21, or will it all fall in the 2020/21 year.

Perhaps someone has seen something about this that I have not, or maybe we just have to wait for for more detailed guidance from the Government.
 

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By julie.severn
20th Apr 2020 15:40

That's a very good question - I have tax returns that need doing now for subcontractors as the tax refunds they are entitled to will help enormously at the moment.

I had assumed that, as it's classed as a grant perhaps it's as and when received, but I haven't read anything.

I suppose if you were applying the cash accounting scheme then that's fine, but generally I don't as it goes against the grain.

In terms of affecting annual income for tax purposes it will most likely only be one week of March, so very low impact and, as I do not know if, when, or how much will be received, I intend to carry on and do the tax returns as normal. If they need to be adjusted so be it, but people are desperately in need of these refunds right now. If they have to pay a couple of pounds back, they can do that when they receive the grant!

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Replying to julie.severn:
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By Dowland
29th Apr 2020 17:12

If the receipt is to be taxed on the accruals basis will it not be that one third of the amount received in June is taxable in the 2019/2020 accounts rather than the one week you refer to as although I appreciate the fact that the client may have only not been able to work for the last week they will receive a payment for the entire month of March in effect.

I have not seen any more guidance which clarifies whether it is to be taxed on the accruals basis or receipts basis. I accept that if your client is on the Cash Basis then it will be receipts basis. Has anyone else seen anything that I have missed?

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Replying to Dowland:
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By Wanderer
29th Apr 2020 17:38

It's obviously been announced that it's taxable. Hoping when we get some actual regulations, rather than guidance, that they will cover off this point as well.
My current view is to include it in the accounts of the year when received. For many self employed clients (depending on their year end date) it will make no difference.
But, I'll wait for the regulations before considering it in any detail.

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Replying to Wanderer:
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By Dowland
29th Apr 2020 18:00

Agreed. We need regulations/legislation to confirm final position. It just makes life difficult if you are tyring to prepare accounts for sole traders with 31 March/5 April year ends. Clients want turned around quickly but will probably tell them that cannot be finalised until we konw the final regulations/legislation and the amount they actually receive.

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By CazzyT
20th Apr 2020 15:44

I will follow this as I was working on the basis that it will be a single payment on the date it is received, so all falling in 20/21 but may have to rethink if someone knows differently.

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Tornado
By Tornado
20th Apr 2020 16:09

Also ........

Is this payment meant to be a set-off against trading expenses in the Accounts or declared as separate taxable income in the Tax Return?. This could make a big difference to losses, capital allowance claims, etc.

I would have thought the latter as the grant is based on Taxable Income (Adjusted Net Profit), but maybe not.

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Replying to Tornado:
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By Wanderer
20th Apr 2020 16:11

I'd say neither.
Probably show it as income (separate line), in the trading accounts.

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Tornado
By Tornado
21st May 2020 17:00

21st May 2020

This seems to suggest that the grant in taxed in just the 2020/21 tax year, but HMRC have yet to confirm this.

https://www.tax.org.uk/policy-and-technical/covid-19/self-employment-inc...

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Replying to Tornado:
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By Dowland
22nd May 2020 12:35

We will wait for HMRC to confirm this.

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