Concern at tax return confusion for recipients of COVID-19 self-employment grants

The Low Incomes Tax Reform Group (LITRG) is warning people who have claimed Self-Employment Income Support Scheme (SEISS) grants that this 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,1which 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.2 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.


LITRG is receiving messages from confused taxpayers 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?


Head of LITRG Victoria Todd 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 return3 and ensure that it is included in the correct box. There are additional complexities for taxpayers who have multiple trades4 or are in a partnership.”5


LITRG understands that this is a confusing area for taxpayers, especially given the fact that the treatment of SEISS grants is unique and different from other coronavirus business support grants and that many people are experiencing ongoing disruption and stress because of the pandemic.


LITRG has published new guidance to explain which SEISS grants should be included on the 2020/21 tax returns and which tax return boxes are the correct ones to fill out.6