Clients have been asking us how the SEISS grants, the ones for the self-employed, are to be taxed.
Firstly, it’s worth reminding ourselves how many grants there have been and which periods they were, in theory, covering:
Grant 1 was for March 2020 to May 2020
Grant 2 was for June 2020 to August 2020
Grant 3 was for November 2020 to January 2021
Grant 4 is for February 2021 to April 2021
Grant 5 will be for May 2021 through to September 2021
The plan was for all these grants to be taxed in 2020/2021, the amount going into a special box on the 2021 tax return. That applied even to the SEISS Grant 1, part of which, as above, covered the tax year to 5 April 2020.
The current position (i.e. the legislation as it stands) is still that all SEISS grants are taxable in 2020/21. However given the extension of the scheme with the fourth and fifth grants, it’s clear this needs to change. We understand that the Finance Bill 2021 will include a measure to change the tax treatment of SEISS grants which will now be subject to taxation in the tax year in which the amount was received.
What other known tax implications of these grants are there? Well no doubt many will come to light but ones already known which are worth highlighting are:
- They are not subject to VAT (in case you had wondered). So traders will not be deemed to have exceeded the VAT registration limit by virtue of adding SEISS grants onto their other income
- The trading allowance (£1,000) cannot be set against the SEISS grants
- SEISS income is taken into account in assessing eligibility to tax credits and universal credit claims
- They can be offset with trading losses
- They are taken into account in calculating payments on account
- They are taken into account in calculating student loan repayments
We will as always be guiding our clients through all this!