Increased turnover is a red flag that SEISS grants may need to be repaid, but it isn’t conclusive. A much more granular approach is needed, for example to establish whether a new contract arose providing a late boost to profits unforeseen at the time a claim was made.

Each SEISS claim required a series of declarations and the qualifying conditions have evolved during the pandemic. The onus is on the claimant to be able to prove that they were eligible and entitled to the grant at the time they made the claim. If they should not have claimed they must notify HMRC and repay the grant to HMRC who have been provided with substantial resources to recover wrongly claimed coronavirus support payments; this work is underway for SEISS.

Evidence required to substantiate SEISS claims

Ideally, alongside accounting records, there will be contemporaneous notes collating adequate evidence at the time each claim was made showing the effect of the pandemic on the business, based on factors then known. In the real world, it may be necessary to roll-back to March 2020 at the earliest opportunity completing a business diary of significant dates, including relevant school and childcare closures, but also when new contracts became probable. It may be relevant to ensure that not only paperwork but emails and even social media exchanges are securely saved.

Notifying HMRC about incorrectly claimed SEISS grants, including tax return treatment

The taxpayer should notify HMRC of any necessary repayments of SEISS grants as soon as they become aware of not meeting eligibility criteria (see table below for notification deadlines). There are two alternative notification mechanisms, each with its own tax return treatment to follow so that a double charge to tax does not arise.

1. Stand-alone

The taxpayer themselves can notify using the link telling HMRC and paying back SEISS grants to establish standard penalty mitigations early for unprompted, quality disclosure and will be provided with bank details for HMRC SEISS Receipts. Grants which have already been repaid (or assessed) are not subject to tax or NIC and should be deducted from the amount received shown on the self-employment or partnership pages so that only the net amount retained is included on those pages; any amount already notified should not be re-notified on page 5 of the main return.

2. Tax return

Only if HMRC has not already been notified of incorrectly claimed SEISS, there is an opportunity to do this on the tax return and repayment will be made through self-assessment. The amount incorrectly claimed must be declared as indicated on page 5 of the main return pages, but not included on the self-employment or partnership pages.

It seems likely that in cases of financial hardship it will be possible to request a Time to Pay arrangement.

Repaying SEISS grants and penalties for late notification

HMRC can raise assessments to recover SEISS, payable within 30 days of the assessment. Otherwise SEISS repayment deadlines are 31st January 2022 (SEISS 1 to 3) and 31st January 2023 (SEISS 4 and 5). Late payment interest and penalties apply to SEISS repayments as normal.

If the taxpayer knew they were not entitled and did not tell HMRC within the 90-day notification period, the failure will be treated as ‘deliberate and concealed’; ignorance of the rules is not generally successful in reasonable excuse appeals. Penalties can be up to 100% of the incorrectly claimed grant.

If the taxpayer did not know they were not entitled to a grant when they received it, HMRC will only charge ‘failure to notify’ penalties if repayment relating to SEISS 1 to 3 has not been made by 31st January 2022 and by 31st January 2023 for SEISS 4 and 5. 

Take care

• Download a PDF version of the table

August 2021