Tax Writer Taxwriter Ltd
Columnist
Share this content
The Chancellor
flickr_chancellor_Number10

Reporting SEISS grants: Get the details right

by

There is much confusion around the reporting of SEISS grants on tax returns; accounting rules say one thing, HMRC’s instructions say another. Rebecca Cave has the definitive answers. 

4th Jun 2021
Tax Writer Taxwriter Ltd
Columnist
Share this content

The SEISS grants are taxable in the year they are received. This means the tax year, not the accounting year or basis period.

This is legislated for by Finance Bill 2021, s 32(1) which amends FA 2020, Sch 16, para 3(3) so it reads: “the whole of the amount is to be treated as a receipt of a revenue nature of the tax year in which it is received (irrespective of its treatment for accounting purposes)”.

The tax treatment thus overrides the GAAP and basis period rules. This may well lead to a misalignment between the period in which the Covid-reduced profits are taxed and the grants which are designed to replace that lost income are taxed.

The first three SEISS grants will usually be taxed in 2020/21, and must be reported on the 2020/21 tax return. The fourth and fifth SEISS grants will be taxed in 2021/22 and must be reported on the 2021/22 tax return.  

How much?

You need to know the accurate amount of the cash grant received to report on the tax return. This amount was reflected to the taxpayer as an on-screen message part of the grant claims process. As tax agents have been excluded from the SEISS claims process, you won’t have seen this message.

Unless the taxpayer took a screenshot at the right moment, and sent that to you, the only way to confirm the amount of SEISS grant received is to check all the bank statements for the entire year to 5 April 2021.   

Register for free to continue reading

It’s 100% free and provides unlimited access to the latest accounting news, advice and insight every day. As well as access to this exclusive article, you can:

View all AccountingWEB content
Comment on articles
Watch our digital shows and more

Access content now

Already have an account?

Replies (13)

Please login or register to join the discussion.

avatar
By GHarr497688
04th Jun 2021 20:43

All of mine have been treated in accordance with this article and yet HMRC are still not processing the returns. Is the article accurate I ask or are HMRC incorrect. How can HMRC know if the partnership has agreed to retain the grants or if each partner has directly received this? All in all excluding the Accountant from the process and information wasn't a smart move and appears to now be making more work for HMRC and Accountant alike. Well done HMRC :)

Thanks (16)
avatar
By M Winstone
07th Jun 2021 10:03

Thanks for this, can I assume that a voluntary repayment of the SEISS grant in the subsequent tax year is a deductible expense from taxable income for that year? If so, where should it be included?

Thanks (0)
Replying to M Winstone:
avatar
By Ardeninian
07th Jun 2021 10:38

It is a reduction in the amount of taxable grant received - you will need to reduce the amount entered in the return, or amend it if you have already submitted it.

Thanks (1)
Replying to Ardeninian:
avatar
By M Winstone
07th Jun 2021 11:36

Thank you. The return was submitted in early April, as income rose by 50% the prudent view was to repay the SEISS voluntarily, immediately.
Looks like an amendment is the way to go.

Thanks (0)
avatar
By Hardev
07th Jun 2021 10:13

How would one get the balance sheet for a Sole Trader to balance if the SEISS is ignored until the tax adjustments. The Net Profit figure from box 47 (before the tax adjustments) is automatically entered in the Balance Sheet in box 96. As the SEISS will have gone into the business bank account so in the Balance Sheet the assets (bank account) will be greater by the value of the SEISS. Hope I'm making sense.

Thanks (0)
Replying to Hardev:
avatar
By Ardeninian
07th Jun 2021 10:40

If you insist on including the balance sheet, and you are treating SEISS as being included within the business for accounting purposes, as a workaround you should include the amount as capital introduced.

Thanks (1)
Replying to Ardeninian:
avatar
By Hardev
07th Jun 2021 11:30

Thanks. Agreed - that is the only way it would work.

Thanks (0)
Replying to Hardev:
avatar
By Bruce Roberts
07th Jun 2021 11:42

Another example of HMRC not understanding basic bookkeeping. We have been including the SEISS as capital introduced on the tax return despite the fact that it is clearly income in the accounts. Incorrect but what choice do we have?

Thanks (0)
avatar
By cmiskin
07th Jun 2021 11:47

The taxpayer can check how much has been claimed by going to https://www.gov.uk/guidance/return-to-your-claim-for-the-self-employment....

They don’t need to have kept a screenshot.

Thanks (0)
avatar
By Rick J
07th Jun 2021 11:57

So what happens if a client has a 30th April 2020 year end, so not too much affected by Covid and is not far off a normal year of income.
This then becomes taxable for 20/21, and thus coincides with the taxation of Grants 1 to 3 to provide a taxable income for 2020/21 of approaching two normal year of income. The grant, however, was intended to cover the year of minimal income, not a year of almost normal income.
There are various approaches involving adjusting year ends, and use of overlap relief, but I must admit I find these somewhat confusing and will take a while to figure out. Anyone already thought this through and can save me, (and quite a few others reading this thread) the hassle and likelihood of getting it wrong?

Thanks (0)
Replying to Rick J:
avatar
By webpoints
14th Jun 2021 15:14

Hi - was there any more information posted after your query was posted? We have the same position as you.

Thanks (0)
avatar
By CJaneH
07th Jun 2021 11:58

Thanks. I have now realised was missing box on main return.

Thanks (0)
avatar
By Rick J
14th Jun 2021 18:14

Hi Webpoints

Nothing as yet, so I am still awaiting words of wisdom from somebody. The answer will probably involve overlap relief, though even if its relevant and can be quantified, its not likely to compensate much as we are dealing with profitability levels as at 1996/7. I understand where OR is relevant but has not been saved coming forward, HMRC can provide the information if you call them.
Not sure what will be longer - the time for HMRC to answer the call, or the time from 1996/7 to now.

I'm pretty sure, though that the main tax advisory services will have spotted this and will have practice procedures available to their subscribers.

Goes to show how little HMRC really understand about the real world of taxpaying and tax payers. Like offering to delay payments of self employed income tax, very well intentioned I have no doubt, without considering that one of the effects is to ultimately build up layers of debt for the taxpayer. SEISS is part of that scenario, so making it out of sync for taxpayers with early year ends just makes it worse.

Thanks (0)