HOW TO REPORT A SEISS GRANT ON YOUR TAX RETURN?

The SEISS Grant

What is SEISS Grant?

SEISS (Self-Employment Income Support Scheme) came as good news for several sole traders in the UK. Chancellor Rishi Sunak extended the scheme on 3 Mar 2021 while presenting the budget. It will now remain in force till Sep 2021. The government introduced this policy in May 2020 as a temporary measure for self-employed people who suffered financially due to the covid 19 pandemic and the first lockdown in the country.

We have already seen three rounds of this grant. The fourth round can grant up to 7500 per sole-trader, accounting for 80% of earning losses in Feb-Apr 2021. Self-employed people can claim the fifth round of grants also in Jul 2021 for covering their losses from May onwards. It would cover 80% of your loss if you suffered a fall in turnover by 30%.

Who Is Eligible for A SEISS Grant?

You can apply subject to the following conditions:

Annual trading profits below 50,000

Most of your income comes from self-employment

Completed self-assessment tax return

An ordinary partnership can claim based on an individual share in profits.

Those who earn income from property cannot apply

The sole trader’s profits reduced significantly due to decreased demand or capacity or inability to trade due to the pandemic

You must declare that you want to continue trading

You can apply for the SEISS grant online, and HMRC will get in touch with you with the claim dates. You can expect the SEISS grant within six working days.

What Is Different in The Fourth Seiss Grant?

Even if you did not qualify in previous rounds, you could still apply provided you have filed the self-assessment tax return by 2 Mar 2021. Remember that late filers are not eligible. Moreover, if you claimed in any of the first three rounds, you cannot apply this time.

The scheme promises to help about 600,000 sole traders who could not get any grant so far. The system will consider the tax return of 2019-20. If you were self-employed in that tax year, you could apply by 31 May 2021.

Reporting In Your Self-Assessment Return

SEISS grant is not a loan, so there is no need to repay it. Nevertheless, it is subject to class 4 national insurance contributions and Income tax.

These grants are taxable in the year of receipt. Hence, if you got the first three grants, you will have to pay tax on them in the 2020-21 taxation year and report in the self-assessment year 2020-21

Similarly, if you are a self-employed person (aka sole trader), your 4th/5th SEISS grants will be taxable in 2021-22 tax year, and you must report them in 2021-22 self-assessment.

HMRC has included a specific box to enter the amount received from SEISS grants for self-employed people in tax return forms of these two years.

Other Features Of SEISS Grants

If you received a grant more than you should have or were not entitled to, please notify HMRC within 90 days to return the grant value, failing which HMRC may impose a penalty.

Remember that SEISS does not constitute a part of taxable turnover for the calculation of VAT. Hence, if grant money increases the VAT threshold above 85,000, you still need not register for VAT.

If you could not pay your self-assessment tax due to covid 19, you can pay in affordable instalments, including delayed payments due in Jul 2020.

If you do not fall under the purview of SEISS grants, you can apply for other cash grants, tax reliefs, or govt loans, even if your business is closed.

You may check the GOV.UK website for further information.

Micro Business Accountants Guide

Micro-Business

What are Micro-Business Accounts?

Every business must file the statutory company tax return with HMRC. However, small and micro businesses have several options for submitting their returns. You can save money and time by submitting your return in a simple micro-entity account format.

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According to the Companies Act 2006, we can classify a limited company as a micro business if any two of the following three conditions are true during a particular financial year.

It may not have an annual turnover above £632,000.

The balance sheet total may not exceed £316,000.

It may not have an average of more than ten employees in the financial year.

How Do Micro-Entities Do Accounting?

Microbusinesses can do accounting by:

  1. Opening a bank account
  2. Tracking their income and expenses
  3. Developing a bookkeeping system with digital records
  4. Setting up a payroll systems
  5. Investigating import tax
  6. Determining how they will get paid
  7. Establishing VAT procedures
  8. Determining their tax obligations
  9. Calculating net profit margin
  10. Finding good accounting partners

Business Expenses

You can think of any expense as a business expense by determining whether it is for private or business use.

Setup Costs: You can include the pre-trading expenses in the first period of your accounting.

Office Costs: They include printing, stationery, internet, separate landline phone for business.

Clothing Expenses: Protective clothing and uniform except for everyday clothing costs

Insurance and Subscription Expenses: Recognized body relating to business and public Liability insurance

Banking Expenses: Bank charges, annual arrangement fee, credit card expenses

Transport Expenses: Mileage allowances with car parking charges, Specific percentage of motor expenses for business

Using Home for Business: You can use HMRC rates or actual expenses incurred in the period.

Subsistence Costs: You can claim it if you are away for more than five hours.

Hotel Expenses: If you need an overnight stay in a hotel for a business trip

Disallowable Expenses

The taxable profit is different from your accounting profit. The expenses are also disallowable if they are wholly and exclusively not for business purposes.

Drawings for personal use; however, wages are allowable for a limited company

Goods for personal use

Part of landline/ mobile and internet, if you use it for both business and private

Entertaining customers, suppliers, and clients

Repayment of interest on a loan

Business gifting for entertaining

Donation amount

Late filing penalties, motor fines, and similar expenses

An Icing on the Cake

We provide a personal accountant for small businesses to help in:

Giving necessary tax advice whenever required

Managing your salary planning, dividends, taxes, and VAT issues

Filing PAYE, VAT, corporation tax returns, and annual accounts

Why Choose GM Professional Accountants?

We provide accounting software as default in our all-inclusive monthly packages. You can quickly manage your routine bookkeeping activities on your phone app or computer. You need not postpone your work till the end of the day as you can do these activities online on this software. For instance, send invoices and record receipts online.

We take care of complex and time-consuming activities: E.g., Preparing P&L account; Checking business cash flows; Checking if business finances are in a strong position; Filing tax returns, etc. The best part of associating with us is that you need not spend hours together in front of mundane spreadsheets.

We have offices in London, Manchester , Birmingham and Essex.

Tax-Efficiency

Small entities need to keep as much of their earnings as possible to maintain positive cash flows and be profitable in business. We can help you make this possible by advising you about ways to keep your business accounting in line with HMRC rules. You will end up paying as few taxes as legally feasible because we ensure that you retain more of your earnings.