SEISS ACCOUNTING: How and when do I account for my self-employed support grants?
For struggling self-employed workers the Government’s Self-Employment Income Support Scheme (SEISS) grants have been a vital lifeline throughout the coronavirus pandemic.
A year on from the first coronavirus travel and social restrictions placed on the UK, the Government’s support scheme is still running with a fourth and fifth grant promised by the Chancellor Rishi Sunak to come.
The actual process of claiming a SEISS grant is relatively easy if the claimant is eligible under the Chancellor’s strict criteria. However, with annual accounts starting to be finalised there is now some confusion as to how and when the SEISS payments are accounted.
Jason Short, a taxi industry and self-employed specialist accountant from Short & Sons Accountants Ltd, said: “We have had a number of clients who have supplied us with their 2020-21 self-employment data already, but it has come to light that there is some confusion over the dates at which the SEISS grants should be reported.
“Most self-employed people finish their accounting year (known as a basis period) on the 5th April every year, but some do not. In one extreme case, we have one of our clients that finishes his accounts on the 30th April. This means his 2021 accounting year starts on the 1st May 2019 and finishes on the 30th April 2020. To add to the confusion, he can only file this information after the 6th April 2021, and he then has until the 31st January 2022 to pay any tax due. That is a full 21 months later!
“It is no wonder there is so much confusion.”
There is also added confusion for some over how to account for the payments based on when the grant was received and the time period the grant covers. For example the upcoming fourth SEISS grant will be paid in April 2021, a new accounting year, but is partly based on a loss of revenue in the previous accounting tax year.
Short says: “The grants are taxable in the fiscal year they are received, not your accounting year. This means that the first three grants are taxable in the tax year 2020/21 - April to April. They should be reported in full on your 2020/21 self-assessment tax return in due course. According to the Chartered Institute of Taxation, specific boxes will be provided on the SA100 and the following self-employment pages.
“Grants should not be reported within your tax return for the tax year 2019/20 and the fourth and fifth grants are taxable in the tax year 2021/22 and should be reported on your 2021/22 self-assessment return in due course.”
Self-employed workers are set to receive the fourth grant in late April. Eligible workers will be provided a taxable grant calculated at 80% of 3 months’ average trading profits. The fourth grant will be paid out in a single instalment and capped at £7,500 in total.
The UK Government has also announced that there will be a fifth and final grant covering May to September.
Claimants will be able to claim from late July if you are eligible for the fifth grant.
The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.
The fifth grant will be worth:
80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more
30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%.
Further details will be provided on the fifth grant in due course.
