SEISS claimants ‘are confused’ when accounting for received grants says Low Incomes Tax Reform Group
Updated: Jul 4, 2021
The Low Incomes Tax Reform Group (LITRG) has warned people claiming Self-Employment Income Support Scheme (SEISS) grants that the income is taxable and that they must make sure they complete their tax returns accurately by including the grants in the correct place.
The first three SEISS grants should be included in 2020/21 self-assessment tax returns, which many self-employed and partnerships are currently completing. But LITRG is concerned that some SEISS grant claimants are unaware that these grants are taxable income and subject to income tax and self-employment National Insurance contributions.
This means that some people may exclude SEISS grant income from their tax return altogether and thereby submit an incorrect return to HMRC and not pay all of the tax they owe.
Confused taxpayers are contacting LITRG asking where to include the SEISS grants on the tax return form and this has led LITRG to publish new guidance on its website about SEISS: Self-Employment Income Support Scheme: where do I include the grants on my tax return?
Victoria Todd, Head of LITRG, said: “We are concerned that some SEISS claimants are confused about what to do with their SEISS grant income when completing their tax returns and this may result in inaccurate tax returns being filed with HMRC and the wrong amount of tax and National Insurance being calculated.
“Self-employed taxpayers are contacting us asking what they need to do with their SEISS grants because they have not seen or understood HMRC’s guidance. As this is the first time the SEISS grants have had to be included in a tax return it is understandable that some errors may be made.
“Unfortunately, the situation is compounded as HMRC cannot pre-populate the SEISS grants on the tax return, so it is up to the claimant to decide which of the SEISS grants should be included on a particular tax return and ensure that it is included in the correct box. There are additional complexities for taxpayers who have multiple trades or are in a partnership.”
For most SEISS claimants the first three grants must be included on their 2020/21 tax returns and the fourth and fifth grants should be included on their 2021/22 tax return.
The first three SEISS grants must be included as taxable income in the 2020/21 tax year regardless of the accounting period for the self-employed business or partnership. The only exception is for partners whose SEISS grants have been paid into their business partnership and then distributed as per the Partnership Agreement.
