SEISS and tax

Orddu

I'm just checking I've got this clear in my head, if someone can tell me either way!  I've searched the forums but haven't found a clear one-stop answer.

For tax returns 20-21 and 21-22 (and let's hope it goes no further!) there will be 2 separate boxes, one for actual worked-for-it turnover and one for all the SEISS grants added together.

Presumably this is so that the SEISS, if it takes you above your usual turnover, won't cause you to have a massive payment-on-account added to the following year (yes I know you'll still be taxed on it, but just that year, not projected into the year after as though you suddenly had had a bumper trading year).

So, 20000 income and 5000 SEISS, for instance, would count both for tax due from this year, but will only use the 20k figure to estimate next year's turnover.  Otherwise, when we go back to "normal" the year after, you would have a gigantic tax bill initially, and then a rebate when the "real" turnover (without SEISS) was declared for that year.

I think I confused even myself half-way through that!

Jeremy535897

The separate box (27.1 on SA103S) for SEISS grants will include for 2020/21 SEISS 1, 2 and 3, and will include for 2021/22 SEISS 4 and 5.

Other grants should be entered in the "other business income" box 10 on SA103S.

Payments on account are calculated on the overall tax and class 4 NIC bill for the year, so separating out SEISS (and the other grants) will have no effect on how payments on account are calculated. If you know they will be too big, make a claim to reduce them.

Orddu

Jeremy535897 said:

Payments on account are calculated on the overall tax and class 4 NIC bill for the year, so separating out SEISS (and the other grants) will have no effect on how payments on account are calculated. If you know they will be too big, make a claim to reduce them.

Ahha!  That's the exact thing I needed to know, thank you!  I had enough of a drop in income to be happy that I should apply, but overall it will take my income above my usual average, I think.  I had to apply to have tax reduced a couple of years ago when I had 1/3 of the year off sick with a brain tumour, so I know the process.

Thank you Jeremy!

calcotti

I assume the reason they have put in a separate box is largely as a prompt to make sure people include them on the return.

Jeremy535897

calcotti said:

I assume the reason they have put in a separate box is largely as a prompt to make sure people include them on the return.

They now have checking software for 2020/21 that compares the figure in the relevant box for 2020/21 with what has been paid for the first three grants. If it does not match, HMRC auto corrects the return. If the taxpayer included the SEISS grants in turnover by mistake, they will then have to amend the return to reduce turnover so the grants are not double counted.

calcotti

Jeremy535897 said:

calcotti said:

I assume the reason they have put in a separate box is largely as a prompt to make sure people include them on the return.

They now have checking software for 2020/21 that compares the figure in the relevant box for 2020/21 with what has been paid for the first three grants. If it does not match, HMRC auto corrects the return. If the taxpayer included the SEISS grants in turnover by mistake, they will then have to amend the return to reduce turnover so the grants are not double counted.

So a separate box as a prompt to make sure people don't include the SEISS in their 'normal' turnover figure!

Jeremy535897

calcotti said:

Jeremy535897 said:

calcotti said:

I assume the reason they have put in a separate box is largely as a prompt to make sure people include them on the return.

They now have checking software for 2020/21 that compares the figure in the relevant box for 2020/21 with what has been paid for the first three grants. If it does not match, HMRC auto corrects the return. If the taxpayer included the SEISS grants in turnover by mistake, they will then have to amend the return to reduce turnover so the grants are not double counted.

So a separate box as a prompt to make sure people don't include the SEISS in their 'normal' turnover figure!

I am more cynical than you. It's there so they can check you have included the grants in your profits!

Pennywise

Jeremy535897 said:

calcotti said:

Jeremy535897 said:

calcotti said:

I assume the reason they have put in a separate box is largely as a prompt to make sure people include them on the return.

They now have checking software for 2020/21 that compares the figure in the relevant box for 2020/21 with what has been paid for the first three grants. If it does not match, HMRC auto corrects the return. If the taxpayer included the SEISS grants in turnover by mistake, they will then have to amend the return to reduce turnover so the grants are not double counted.

So a separate box as a prompt to make sure people don't include the SEISS in their 'normal' turnover figure!

I am more cynical than you. It's there so they can check you have included the grants in your profits!

And makes it easier for the computer algorithm to check "covid year" profits against prior year profits to check that the business was "adversely affected" and therefore eligible for the grants.  I.e. if profits in the covid year are higher (excluding grants), then that could be a trigger for them to open an enquiry into whether the grants were claimed legitimately.  

Jeremy535897

Pennywise said:

Jeremy535897 said:

calcotti said:

Jeremy535897 said:

calcotti said:

I assume the reason they have put in a separate box is largely as a prompt to make sure people include them on the return.

They now have checking software for 2020/21 that compares the figure in the relevant box for 2020/21 with what has been paid for the first three grants. If it does not match, HMRC auto corrects the return. If the taxpayer included the SEISS grants in turnover by mistake, they will then have to amend the return to reduce turnover so the grants are not double counted.

So a separate box as a prompt to make sure people don't include the SEISS in their 'normal' turnover figure!

I am more cynical than you. It's there so they can check you have included the grants in your profits!

And makes it easier for the computer algorithm to check "covid year" profits against prior year profits to check that the business was "adversely affected" and therefore eligible for the grants.  I.e. if profits in the covid year are higher (excluding grants), then that could be a trigger for them to open an enquiry into whether the grants were claimed legitimately.  

They have made it rather difficult for themselves, though, as the comparison was with what the pandemic year should have been, rather than with the prior year. Also, as their algorithm knows what should have been in the box, they didn't need people separating it out, as they could just deduct it from the pandemic year profit.