Low Incomes Tax Reform Group: Jeopardy of double tax risk for SEISS claimants

Many self-employed, and partners in partnerships, claimed the fourth and fifth Self-Employment Income Support Scheme (SEISS) grants during the last tax year.1 LITRG is reminding SEISS claimants that these grant payments are taxable income and need to be included on their 2021/22 Self Assessment tax returns2 and warns of a potentially easy-to-make mistake that can see them take a double tax hit.
The first three SEISS grants should have been included on the 2020/21 tax returns. But the fourth and fifth SEISS grants need declaring on the 2021/22 tax returns which many self-employed individuals and partners in partnerships will complete in the months ahead.

The SEISS grants must be included in a different box to other Coronavirus business support payments on the tax return, but LITRG warns this can confuse people when filling in their form.3

If the SEISS grants are included in the wrong box on the tax return, then HMRC will issue an amended tax calculation once the tax return has been submitted to include the SEISS grants. But it can mean that the grants are double counted in the tax calculation in some circumstances.4

Claire Thackaberry, Technical Officer at LITRG, said:

“We want to raise awareness of this potential pitfall well ahead of the tax return deadline of October for paper tax forms and January for online tax returns.

“Some sole traders and partners are aware that these grants need to be included in the appropriate box on their tax return because they claimed at least one of the first three grants which were taxable in 2020/21. But because the fourth and fifth grants were the first SEISS grants available for new businesses5 some of these claimants might not realise these grants are taxable and need to be included in a specific place on the tax return. If they are not included in the right place then HMRC will amend the tax calculation automatically – and in certain cases the SEISS grants could be taxed twice.

“To avoid overpaying tax it is imperative that taxpayers ensure they include the correct information in the correct place on their tax return. If an error is made, then affected taxpayers should make sure they check any amended calculations to make certain that any SEISS grants are not double-counted. We have published guidance to help people understand the HMRC amended calculations.”6