With the fourth round of the Self-Employment Income Support Scheme (SEISS) now well underway, it is important to be aware that new grant clawback rules have been announced by HM Revenue & Customs (HMRC).
The clawback penalties could affect self-employed workers, if they are found to have over-claimed the amount they are entitled to – whether or not they were aware that they had done so – with tougher penalties reserved for individuals who knowingly broke the rules.
It is understandable why, back when SEISS was first introduced, many self-employed workers legitimately thought they would need the money, especially as the initial guidance was a little vague.
However, if you are now completing your accounts and turnover/profits has gone up by the grant amount or more you should consider if you will be able to defend a claim by HMRC, as you may need evidence of your income/profits being affected.
There have already been a number of instances where HMRC has specifically targeted individuals suspected of over-claiming SEISS.
Under the spotlight is any grant funding which a self-employed worker is not entitled to receive or was more than the amount HMRC said the applicant was entitled to at the time of a claim.
Claimants who receive an overpayment must notify HMRC within 90 days of receipt of an SEISS grant or face a penalty of up to 100 per cent on the amount of the SEISS grant that has been overpaid.
Although overpayments must be reported to HMRC within a short period, individuals are being offered a longer window for repayment, as no fines will be enforced, providing overpayments are settled by the end of January 2022.
When calculating fines, HMRC has said it will take into account whether the taxpayer knew they were entitled to the SEISS grant when they received it, and when it became repayable or chargeable to tax because the individual’s circumstances changed.
The guidance states: “If you knew you were not entitled to your grant and did not tell us in the notification period, the law treats your failure as deliberate and concealed. This means we can charge a penalty of up to 100 per cent on the amount of the SEISS grant that you were not entitled to receive or keep.
“If you did not know you were not entitled to your grant when you received it, we will only charge you a penalty if you have not repaid the grant by 31 January 2022.”
HMRC is currently issuing nudge letters to many users of the SEISS grant regarding the new penalty regime, encouraging them to report overpayments where they have occurred.
Anyone who has over claimed will be able to report this in a section on the tax return for 2020/21, which will allow them to make a repayment.
If you are struggling to understand the rules relating to SEISS or are worried that you may inadvertently have over claimed, please get in touch with the team at McGills in Cirencester who will be happy to help. Tel: 01285 652128, email: firstname.lastname@example.org or visit us at Oakley House, Tetbury Road, Cirencester, Gloucestershire, GL7 1US