How will your SEISS grant be taxed? - Veterinary Practice
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How will your SEISS grant be taxed?

Tax preparation specialist offers guidance for those receiving self employment grant

With the closure date for the fourth round of the government’s SEISS scheme due on 1 June, many of the UK’s self-employed will be ensuring that they take advantage of this vital lifeline for businesses adversely impacted by the COVID-19 pandemic. However, with much confusion surrounding how the grants should be accounted for and how they will be taxed, David Redfern, tax preparation expert and director of DSR Tax Refunds Ltd, offers his specialist guidance for those in receipt of the grants.

Self-employed workers who have experienced an adverse effect on their ability to trade due to the COVID-19 pandemic have until Tuesday 1 June 2021 to claim the fourth grant in the SEISS (Self Employment Income Support Scheme). SEISS 1 to 3 have already closed to new claims and eligibility for the latest scheme remains similar to previous grants. Redfern explains, “If you are self-employed and your business has been ‘adversely affected‘ by the pandemic you may be eligible to claim the grant, providing that you have already submitted your tax returns for tax years including 2019/20 on or before 2nd March 2021 and that you traded in tax years 2019/20 and 2020/21 and you intend to continue to trade into tax year 2021/22. You must meet HMRC’s profit conditions and have experienced a period of adversity between 1st February 2021 and 30th April 2021”. HMRC’s profit conditions require that any SEISS claimant must have trading profits between nil and £50,000 in previous tax years between 2016/17 and 2019/20 and that trading profits are equal to at least 50 percent of income in those years.

Providing a claimant is eligible, they will be able to claim SEISS grant 4 until Tuesday, with the fifth round of the scheme due to open in late July 2021. In order to claim the grant, they will need to use HMRC’s online process. They will need their UTR (unique taxpayer reference), National Insurance number as well as details of their Government Gateway ID and bank account. Redfern states “Self employed individuals are required by HMRC to apply for the grants themselves and tax agents can’t claim on behalf of their clients. However, HMRC does recognise that for some self-employed people, extra help is needed from their tax agent to make a successful claim and as a result, tax agents can support the client in preparing the claim but the client will need to make the actual claim themselves via their Government Gateway login”. Once claimed, HMRC will then inform the taxpayer whether their claim has been successful.

SEISS grants are subject to income tax and Class 4 National Insurance contributions but as they are grants, not loans, they are not intended to be repaid unless the claimant is ineligible to receive a grant that has already been paid. SEISS grants 1 to 3 are taxable within the 2020/21 tax year with subsequent SEISS grants to be taxable within the tax year in which they are received, regardless of the financial year-end of the business. Redfern explains “The amount that a self-employed worker receives via the SEISS scheme should be treated as income and accounted for on their Self Assessment tax return, just as any other income would be but those claiming should note that if they are also claiming Universal Credit, the amount of SEISS income they receive may impact on the amount of Universal Credit they receive”. Where a taxpayer has received a grant they believe they are not entitled to, they must notify HMRC within 90 days of receipt and make arrangements to repay it. However, eligibility decisions are based on the facts available at the time of the claim and if those circumstances subsequently change, there is no need to repay.

Further information and resources about tax for self-employed individuals can be found on the DSR Tax Refunds Ltd website. CIS workers who are struggling with their Self Assessment tax returns are encouraged to contact the firm for support.

About DSR Tax Refunds Ltd

DSR Tax Refunds Ltd is a firm of tax preparation experts who specialise in CIS tax returns for construction workers working within the Construction Industry Scheme (CIS) as well as employees who are eligible to claim a tax refund for their work-related expenses, including employees working from home as a result of the COVID-19 pandemic. Their friendly and helpful team can help with all relevant paperwork to ensure clients claims are handled in an accurate and efficient manner.

For more about DSR Tax Refunds Ltd, visit the website.

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