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When are SEISS (and other) grants taxable?

Are grants declared in line with the financial year or the tax year?

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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.

Kind regards.

Martin-K

Replies (9)

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RLI
By lionofludesch
11th Apr 2021 14:50

Where have you looked ? Certainly not on this forum.

It was made clear from the outset that they would be taxed in 2020/21 (although I assume that this has been modified to the year of receipt now it's dragged on so long).

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Replying to lionofludesch:
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By Hugo Fair
11th Apr 2021 15:15

Interesting, my daily GOV.UK alerts seems to have missed notifying me of that new page last month ... so, thanks.

But not much consolation for OP in that proposed change is not retrospective:
* "Under the current legislation, a payment from SEISS is taxed as income for the tax year 2020 to 2021."
* Under the proposed legislation (within Finance Bill 2021) "the tax treatment of payments from SEISS received after the end of the 2020 to 2021 tax year will be taxed in the year of receipt."

So 1st+2nd+3rd SEISS grants all taxed as income for the tax year 2020-21; only the 4th+5th ones for 2021-22.

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Replying to Hugo Fair:
RLI
By lionofludesch
11th Apr 2021 17:36

I saw it reported at the time but this is the first time I've seen this webpage.

I found it by typing "when are SEISS payments taxable?" into Google's search box.

Thanks (2)
Replying to lionofludesch:
blue sheep
By NH
11th Apr 2021 20:03

Always amazes me how many people cannot (or rather do not) try a Google search first. I probably get asked 150 times every year, how do I pay my tax/vat/paye etc

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Replying to NH:
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By paulwakefield1
12th Apr 2021 07:45

Probably because they rather sensibly trust their accountant rather more than .Gov.UK pages. :-)

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Replying to NH:
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By Paul Crowley
12th Apr 2021 09:02

I get the same request from the same clients very regularly
Still have directors waiting for HMRC to send the correct payslip

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Replying to Paul Crowley:
Routemaster image
By tom123
12th Apr 2021 09:14

you should acquaint yourself with:

letmegooglethat.com !

Maybe the embarrassment will get rid of a few

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By colinhigginson
12th Apr 2021 10:51

To clarify, the only exception to the SEISS grant being taxable in the tax year is where a partner in a business pays the grant into the partnership and the partners are to receive a share. In this circumstance the grant is taxable in the accounting period, not the tax year. So a 30th April 2020 year end will only have the first grant taxable in 2020//21 with the rest falling into 2021/22.

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