Please can you clarify when the SEISS payments are declared? I have looked everywhere and it is not clear.
When a client has a year end of 5th April then the grants received during the year ended 5th April 2021 are added to the profit and taxed in the 2020/21 tax year. That is logical and fine.
However, when a client has a year end of - say - 31st May then normally their profit to 31st May 2020 would be taxed in the 2020/21 tax year. If they received a grant in May 2020 then that would be included. If they receive further grants in August and December 2020, are these included or are they included in the figures to 31st May 2021 and taxed in 2021/22?
This second method seems logical but most places state that the grants are all taxable in 2020/21.
The reason this has come up is that I have a client who has a small dance school. Accounts for the year ended 31st May 2020 showed a profit of £13,000 which was slightly down on the previous year as she was closed for April and May 2020. She has been mainly closed since, with minimal income from then to now. Her profit for the year ending 31st May 2021 will be no more than £500.
She received grants of approximately:
£2,500 in May 2020
£2,000 in August 2020
£2,500 in December 2020
(presumably £2,500 in May and maybe September 2021 to come)
Reading the guidance, the first three of these are taxable in 2020/21. That makes her taxable profit £20,000 for 2020/21 and £3,000 for 2021/22. That is not logical, surely the tax on the grants should be related to the period of accounts when they are received?
If the grants are added onto the profit to 31st May each year then the figures would be
2020/21 £13,000 plus £2,500 = £15,500
2021/22 £500 plus £2,000 plus £2,500 = £5,000 (plus the May 2021 grant). This appears to be, in my opinion, more fair.
I hope this is clear and I look forward to any comments or guidance.