Amending tax returns may mean repaying SEISS grants
Tucked away in the latest guidance on SEISS 4 claims are rules indicating that tax return amendments will affect the amounts claimants are entitled to - with the risk of penalties if they don't own up to HMRC.
The latest Treasury direction covering the fourth Self-Employment Income Support Scheme grant process has now been published, confirming the conditions and calculations for SEISS 4.
Tucked away at the back of this document, and easy to miss, are new rules which mean that amending a tax return could result in having to repay all, or some, of a SEISS 4 grant. Taxpayers and their advisers need to be aware of these new rules and take action if an amended return for any of tax years 2016/17 through 2019/20 is submitted on or after 3 March 2021 and a SEISS 4 grant has, or will be, claimed.
Treatment of amendments
The basic rule for SEISS 4 is that amendments to submitted tax returns on or after 3 March 2021 won’t be taken into account by HMRC when working out eligibility and calculating grants.
If you amend a tax return on or after 3 March 2021, you will need to check what the impact of that amendment would have been on the SEISS 4 grant:
- If the amendment would have resulted in you no longer being eligible for the grant, you will need to pay it back in full.
- If the amendment would have resulted in a lower grant being received, you will need to repay the excess.
This is subject to a de minimis limit, which means that no repayment is needed if:
- the amount of the SEISS 4 grant received was £100 or less; or
- the excess to be repaid is £100 or less.
This requirement only applies to SEISS 4 claims (and presumably SEISS 5, though this is yet to be confirmed). There is no requirement to pay back any amounts received under earlier rounds of grants, where the rules remain that any amendment made after 26 March 2020 is effectively ignored.
Paying grants back
Taxpayer and/or their agents are responsible for carrying out the check and working out whether a repayment is needed as a result of an amended return being submitted.
The Treasury direction states that any amounts to be repaid “must be returned to HMRC immediately”. There is a question mark over what that will mean in practice and it is hoped that HMRC will take a pragmatic approach.
However, it is probably best to contact HMRC as soon as possible once an amended return is submitted which may affect a grant. We are expecting more details on how to notify HMRC and make repayment to be included on GOV.UK in due course.
Where a taxpayer does not repay an amount due as a result of a return amendment, HMRC will have the power to recover this under Schedule 16 of Finance Act 2020 (as amended by clause 32 of Finance (No.2) Bill 2019-21).
Failure to repay may also attract interest and some quite nasty penalties – where a taxpayer knows that they need to make a repayment, failure to notify HMRC is deemed to be deliberate and concealed, which could result in a penalty of up to 100% of the amount not repaid.
If an agent who is a member of a professional body becomes aware that a client needs to make a repayment, but they refuse to do so, they should consider their obligations under PCRT.
Practical points to consider
The requirement to check the impact on SEISS 4 grants applies to any amendments to returns that were taken into account when calculating eligibility or amount of grant and not just cases of fraud or deliberate inaccuracy. Even where an amendment is required due to an innocent error, or because estimated figures were used in the original return – something which may be more common this year due to COVID – the taxpayer or agent will need to check the position.
It is not just amendments submitted after the SEISS 4 grant is claimed that need to be considered. Any amendment made on or after the 3 March 2021 cut-off date to a return on which the grant figure depends won’t be reflected in HMRC’s eligibility check or grant calculation for SEISS 4.
If an amendment has been submitted after that date, but before claiming SEISS 4, the claimant should recalculate the amount they receive and pay back any excess to HMRC quickly.
Taxpayers and agents checking the impact of amendments on grants originally calculated by HMRC will need to reverse engineer the figure and recast it using the amended return figures. It is therefore very important to encourage those claiming SEISS 4 grants to keep a copy of the “How we have worked out your grant amount” information supplied by HMRC when making claims.
One other area of concern is lack of awareness of these new rules among taxpayers and agents. There is no time limit beyond which amendments no longer need to be considered, so it could be that changes to returns made some time after claiming a SEISS 4 grant could require a recalculation.
HMRC is considering more active communication around this new rule, to ensure taxpayers and agents are aware of consequences of submitting amended returns.
Finally, as SEISS claims can only be made by the taxpayer, an agent could submit an amended return without being aware that their client has claimed a SEISS 4 grant. It is therefore worth asking any clients for whom you are submitting amended returns whether they have claimed, or will be claiming, a SEISS 4 grant.
You might also be interested in
Emma a technical officer with the Association of Tax Technicians (ATT). Her background is in corporation tax and she also has a focus on VAT.
She trained with Deloitte, working in both their London and Leeds offices, and also spent a short time working in a specialist consultancy firm providing advice to other practitioners before joining...