As the mid-point of the applications window for SEISS 5 grants approaches, HMRC has clarified some of its guidance. ICAEW’s Tax Faculty explains what has changed and shares the latest information on tax returns.
The amount of support available for the fifth grant under the self-employment income support scheme (SEISS) depends on how much the applicant’s turnover has been affected by the pandemic. Those whose turnover has reduced by at least 30%, can apply for a grant of 80% of three months’ average trading profits, capped at £7,500. Those whose turnover has been reduced by less than 30% can apply for a grant of 30% of three months’ average trading profits, capped at £2,850. Inevitably the turnover test, which is new for the fifth grant, has generated a number of questions.
HMRC has updated its guidance to remind subcontractors in the construction industry scheme (CIS) that, when calculating their turnover for the pandemic year and the reference pre-pandemic period, they should include the full amount before any deductions made by contractors.
HMRC has made a minor change to the wording of its guidance on the turnover test as it applies to members of partnerships.
The guidance now reads:
“How you work out your turnover depends on when you were in the partnership and if you have other businesses.
“If you were a member of the same partnership in your reference year and in April 2020 to April 2021 and had no other businesses in either of those years, you’ll need to work out and use the partnership’s total turnover figure for the reference year.
“If you were a member of a partnership in the tax year 2019 to 2020 and had any other businesses in that tax year or in the period April 2020 to April 2021, you’ll need to work out and include your percentage share of the partnership’s turnover. This will be the same as the percentage of profit you took from the partnership in your reference year. You should add this to your turnover from any other businesses.”
On the recent ICAEW SEISS webinar, a member asked how HMRC’s system would deal with turnover figures entered which showed an increase in turnover in the pandemic year.
ICAEW’s Tax Faculty has confirmed with HMRC that the system would accept the figures and award the lower level of grant, but it is unlikely that the other conditions for the grant (reduced activity, capacity or demand which give rise to a significant reduction in profits) would be met in this situation.
If incorrect turnover figures were reported when making a claim, the action required depends on whether the grant amount was too high or too low.
If the grant amount was too high the process described in HMRC’s guidance on reporting and paying back a SEIS grant should be followed.
If the grant amount was too low an additional claim can be made by phoning the SEISS helpline; the deadline for any additional claim is 30 September 2021.
On 31 August, HMRC confirmed that an error which had been identified in the API that pre-populates SEISS grants (and other data items) in commercial self assessment (SA) software has now been resolved.
The error had resulted, in most cases, with the figures inflated by a factor of 100, but the data could be overwritten.
If no SEISS data is being returned by the API it may be that the taxpayer’s record has not yet been reconciled by HMRC or it may be that the software provider has not incorporated the latest version of the API.
From 19 June 2021, where the data does not match its records, HMRC is automatically correcting SEISS grant amounts entered on 2020/21 SA returns.
HMRC is currently processing and correcting returns submitted before that date and expects to clear the backlog soon (no target date has been shared). HMRC understands that the delay in issuing SA302 tax calculations has caused problems where they’re needed for mortgage applications and has written to mortgage lenders to update them on the situation and ask that they consider accepting alternative evidence until this is resolved.
When HMRC corrects a return, it sends the taxpayer and agent an SA302 showing the revised figures. It is important that these revised figures are checked carefully as in some circumstances it may be necessary to amend the original return to avoid being taxed twice on the grants.
HMRC has recently updated its processes and can now accept amendments to SEISS grant entries over the phone from taxpayers and agents (amendments to tax returns usually need to be made in writing).
- ICAEW guidance on SEISS
- ICAEW webinar: SEISS - the fifth grant (recorded 20 July)
- TAXguide 12/21: COVID-19 support grants tax considerations
- SEISS grants and tax return processing
Webinar: SEISS grants update
In this webinar Caroline Miskin, from ICAEW's Tax Faculty, navigates the significant changes to the fifth SEISS grant and covers related tax return and compliance issues.
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
- 31 Aug 2021 (12: 00 AM BST)
- The section titled "self assessment API" has been updated to reflect HMRC's confirmation that the error caused by the API has now been resolved.