Meg Saksida considers the traps to avoid.
The government has several beneficial arrangements to help individuals avoid financial difficulty due to COVID-19. However, it is impossible to aid taxpayers who are not eligible for help. To be eligible for the SEISS grant, HMRC looks at whether the individual had taxable profits in the past, and then looks at the associated Income Tax and National Insurance Contributions (NICs) paid on it. They do this by looking at the taxpayer’s previous self-assessment tax returns, commencing with the 2018/19 tax year. It follows then, that if this self-assessment tax return was not completed or not completed correctly, problems with the receipt of the SEISS grant may follow. This article looks at the common errors found by HMRC and how to avoid them.
Incomplete returns
Usually individuals complete their tax returns online through many different pages and stages progressing with percentages shown on screen. If taxpayers finish the claim to only 99% the return will be refused. In order to correctly return the self-assessment, the applicable page should read a full 100% complete. Once complete there will be a final page showing the receipt number and this should be kept for future reference. A similar process is involved in claiming the SEISS grant itself. Again the taxpayer must finish the claim to 100%. Once complete a page will show the amount of grant eligible, and the 11 digit claim reference number starting with SES.
Use of the wrong pages
Some workers receive income from employment and self-employment during the year. There are separate pages for declaring each source of income in the self-assessment tax return and if a declaration is made in the wrong section, this can not only cause miscalculation of liabilities to Income Tax and NICs but can also affect long term benefits such as a reduced pension. Class 4 NICs are calculated by reference to the amount of taxable profit made by self-employment. Self-employed individuals must therefore register for NICs ensuring they pay both the Class 4 and the Class 2 contributions. If profits from the self-employment are classified as ‘Other taxable income’, this may also affect the amount of NIC paid and then may flow on to impact the availability of the SEISS grant. If for example, self-employment was classified wrongly as employment or as ‘other taxable income’, a reduced grant may have been received. If employment or other taxable income was incorrectly classified as self-employment, the £50,000 profit ceiling (for the grant) may have been incorrectly reached and so no grant may have been received.
Using profits for the wrong tax year
Confusion can abound if the tax return has been completed but returned late. In these cases it is essential that careful checks are made to ensure that the information contained in the return is for the correct period. For the 2018/19 tax return (and from 2016/17 if relevant), both erroneously declaring too little or too much income could affect the receipt of the SEISS grant, as seen above.
Using paper returns
Delays occur frequently in paper tax returns because individuals do not include adequate personal information on the front of the return. The Form SA100 requires the taxpayers National Insurance Number, Unique Tax Reference and their name and address and all these need to be on the front of the form and not contained in a covering letter.
Practical tip
Taxpayers should ensure the self-assessment tax return is completed meticulously in order to avoid problems in the future. If the previous tax returns have been filed with errors, taxpayers have 24 months from 31 January in the year after the tax year to make amendments (or 12 months after the return is filed if filed late).
