Grants and Tax Advice 2021

Dean Flood, Rowland Hall Chartered Certified Accountants

HMR&C have taken a lenient position on tax debt collection over the last 18 months due to the impact of COVID 19. As the economy moves out of the COVID induced recession, HMR&C have issued guidance as to their stance on debt collection for businesses and individuals.

HMR&C GRANTS & TAX COLLECTION 2021 ADVICE

I hope that the readership remains well.

Fifth Self Employed Income Support Scheme Grant

For those self-employed readers whose income is still adversely affected by the Coronavirus pandemic, it should be noted that the latest SEISS grant is now open for applications. As with previous applications, these will need to be submitted by the taxpayer, but most advisors will assist should you need guidance in this area.

The basis of accessing the grant will be determined by whether turnover has been impacted by the virus.

Before making a claim, taxpayers must:

• calculate their turnover for a 12-month period starting from 1 April 2020 to 6 April 2020

• identify their turnover from either 2019/20 or 2018/19 to use as a reference year.

By comparing the two, the grounds for claiming will be determined and will also set the basis of the calculation. The claim will be 80% of 3 month’s average profit based on prior years, capped at £7,500. However, if turnover has reduced by less than 30%, the claim will be restricted to 30% of the same averaged profits, capped at £2,850.

Claiming the fifth SEISS grant is not entirely straightforward so please contact your accountant for advice on determining your turnover figures or eligibility.

HMR&C and Debt Collection

HMR&C have taken a lenient position on tax debt collection over the last 18 months due to the impact of COVID 19. As the economy moves out of the COVID induced recession, HMR&C have issued guidance as to their stance on debt collection for businesses and individuals. Their briefing on these matters can be found at www. gov.uk/government/publications/hmrc-issuebriefing-collecting-tax-debts-as-we-emergefrom-coronavirus-covid-19

The broad message for those taxpayers who are having difficulty in settling taxes, is that they must engage in communication with HMR&C on such matters and to not ignore contact from HMR&C. From September onwards, taxpayers that do not engage with HMR&C over outstanding debts will be pursued by HMR&C using the traditional enforcement powers available to them.

VAT Deferral

The VAT deferral scheme is now closed. If you have not already made arrangements to settle any deferred vat from the Spring of 2020, either in full or using the HMR&C instalment plan, then the deferred VAT is now due in full, and you will be subject to a 5% penalty and interest charges. If this has been overlooked, it is imperative that action is now taken on that matter.

Grants are Taxable

When completing their 2020/21 accounts and tax returns (companies or individuals), some taxpayers are expressing some ‘surprise’ that SEISS grants and grants received from local authorities are taxable. This is indeed the case and businesses should factor in these receipts when assessing their potential tax exposure for 20/21 trading periods.