Pension contributions and Self-Employment Income Support Scheme grant

Thrugelmir

To classify the grant as turnover would be misleading. Simply fall under the broader category of other income for reporting purposes. 
By including as turnover would distort gross profit margins etc. 

DT2001

Thrugelmir said:

To classify the grant as turnover would be misleading. Simply fall under the broader category of other income for reporting purposes. 
By including as turnover would distort gross profit margins etc. 

I agree. It will be interesting to see how banks and mortgage lenders treat the grants. So much lending is down to the computer analysis that classification of income can be important. The net profit may have been adversely affected even after receiving the grant as some costs are fixed. It will need more human input to see how the business is performing once we are into the new normal to correctly assess ability to borrow. 
So best to check the lenders rules and see what your accountant is ‘able’ to do within their guidelines.

Secret2ndAccount

Here is a link to HMRC's internal manual on this subject, including several simple examples

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40458 

If you are a sole trader, SEISS is treated as business income and should be added to your accounts for the earlier part of the year, so that it shows up on your 2021 tax form, completed between April 2021 and Jan 2022. The tax (and NI) will be due in Jan 2022.

You have until 5th April 2021 to contribute to a pesnion in order to receive tax relief against the SEISS income

TCA

Just wondering if anyone has seen something definitive which confirms that the SEISS grants count as relevant UK earnings for pension contribution purposes? Or is it safe to assume that because they're subject to income tax, then they count as relevant UK earnings? Just want to double-check before I make my pension payment.   

Marcon

TCA said:

Just wondering if anyone has seen something definitive which confirms that the SEISS grants count as relevant UK earnings for pension contribution purposes? Or is it safe to assume that because they're subject to income tax, then they count as relevant UK earnings? Just want to double-check before I make my pension payment.   

See https://www.accountingweb.co.uk/any-answers/seiss-grants-and-pension-contributions (read the whole thread - it isn't too long but you need to get to the end of it!)

TCA

Thanks Marcon. I'd seen that thread but wasn't overly persuaded by the contradictory responses from the PAS. The HMRC reply gives me a bit more confidence but just wondered if the answer was in black and white somewhere.

Marcon

TCA said:

Thanks Marcon. I'd seen that thread but wasn't overly persuaded by the contradictory responses from the PAS. The HMRC reply gives me a bit more confidence but just wondered if the answer was in black and white somewhere.

Bit more googling....try this: 

Irrespective of the accounting treatment, grants under the self-employment income support scheme (SEISS) are taxable in the 2020/21 tax year (Finance Act 2020 Sch16(3)(3)). It therefore follows that the grants should be included as income when considering whether to reduce payments on account for 2020/21. There has been speculation that the fourth SEISS grant might be taxable in 2021/22, but that would require a change to the primary legislation.

Finance Act 2020 also ensures that SEISS grants are treated as trading income when calculating trading profits or losses. There will be separate boxes in the self-employment and partnership sections of the 2020/21 self assessment tax return for reporting the grants. It follows that SEISS grants are trading income for pension contribution purposes.   

Source: https://www.icaew.com/insights/tax-news/2021/feb-2021/news-in-brief-10-feb

TCA

Cheers Macron. Had missed that one. If the ICAEW are reaching that conclusion, that's good enough for me. Thanks for posting.