Do SEISS grants need to be paid back?
The Finance Act 2020 received Royal Assent (which means a thumbs up from Liz) on the 22nd of July. In it, a requirement was introduced that stated those who had claimed monies under the Self-Employment Income Support Scheme (SEISS) were required to notify HMRC and repay any money they were not entitled to. This has naturally raised a few hackles - what do you mean “repay”? This was a grant right? Not a loan… right?
Well you are right, the SEISS was definitely grants and not loans which means they do not have to be paid back. BUT, the problem is that many businesses may have inadvertently received an amount under the scheme to which they were not entitled to. In these cases, yup, the money needs to be paid back. But how could this happen if you had to apply for the grant in the first place? Surely our government could not be that incompetent?
The problem is while there are a number of criteria that needed to be met in order to be eligible under the scheme, [un]surprisingly, not all of these were covered by HMRC’s eligibility checks. The eligibility checks focused mainly on data from submitted tax returns, such as non-trading income and levels of trading profit.
It was therefore entirely possible to claim a grant under the SEISS whilst not actually having been eligible for it (whether you intended to dupe the system or not). More fantastic news for already struggling businesses eh? Anyway, how could you have accidentally or otherwise have gotten money you weren’t entitled to? There are a few ways:
- If you claimed but your trade was not actually adversely affected by COVID-19 during the relevant period (this being up to and including 13th July for the 1st period and after 14th July for the 2nd period)
- If you did not intend to continue trading at the time of making the claim or
- If the company ceased to trade in 2019/2020
If you fit any of the above criteria and have received an amount under the scheme then hey, easy mistake to make. The rules were, and still are, all over the place and seem to have been made up on the spot in a lot of cases. But even still, you’ll need to notify HMRC by the 20th of October 2020 at the latest or 90 days after receiving the grant. This can be done by phone or via the dedicated online system on the HMRC website.
Can’t pay, won’t pay? Unfortunately, this is not an option as HMRC has powers to levy a tax charge equal to 100% to claim back any money owed. So sooner or later, they’ll getcha. You could also receive a failure to notify penalty which is exactly the last thing you need right now on top of everything else.
Look, people make mistakes and no one who has inadvertently claimed is at fault. But best to nip it in the bud before the taxman comes knocking on your door. If you are an accountant or payroll bureau, it might be a good idea to go back and review claims made by your clients, especially those made without seeking advice first.