SEISS paybacks: Ineligibility repercussions ‘far from over’ as HMRC claws back grants
HMRC provide advice on self-employed tax returns
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SEISS payments were issued up until September 30 and while the scheme is now closed, claimants may still have to act. Recently, HMRC released updated guidance which warned some, or all, of the payments issued to freelancers may need to be paid back to the Government.
“You must tell us”
HMRC will be sending out letters to self-employed workers if they were issued grants they were ineligible for. This could occur if a claimant did not intend to continue trading when they made a claim or they have incorporated their business.
Where claimants fail to act on these letters, hefty penalties could be issued, as HMRC explained: “You must tell us if you have received a letter from HMRC that says you need to pay back some or all of a grant.”
Peggy de Lange, VP of International Expansion at Fiverr, warned this could be complicated by the eligibility issues which hit freelancers throughout the pandemic.
“The SEISS grants were designed to help the self-employed who were negatively impacted by the pandemic,” she said.
“Yet just over a month since the support was withdrawn, many are being asked to pay back some or all of the grant. Since the SEISS was introduced freelancers battled for eligibility and the repercussions of this are seemingly far from over.
“Asking freelancers to return this money whilst still facing the long-term impact of the pandemic fallout will likely only set them back further. For the self-employed, repaying this support alongside the rising energy bills, interest rates and cuts to universal credit could leave many in an incredibly unstable financial situation.
“Many have not yet recovered from the economical fallout the pandemic caused and support is still needed. Government must consider the full impact this decision will have on the self-employed.”
Unfortunately, a number of industry experts warn this will simply pile additional pressures onto the self-employed sector which is predicted to have very difficult months ahead.
Praveen Gupta, National Head of Tax with Azets, warned SMEs may face Government tax grabs in 2022, while research from The Accountancy Partnership showed entrepreneurs are fearful of how they’ll cope in the coming months.
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Government tax grabs
Mr Gupta urged workers to take advantage of new and extended support schemes while they still can, ahead of rising inflation and a likely “tax grab” by the Chancellor in 2022. He warned harsher rules could be introduced in the Spring, along with the withdrawal of existing support measures.
Mr Gupta explained: “The Chancellor delivered a relatively upbeat Autumn Budget, but more challenges lie ahead and, for many SMEs, the support measures available today won’t be sufficient to offset higher bills over the coming 12 months.
“SMEs should seek professional advice to ensure they take full advantage of every available allowance, with inflation set to keep rising and the extended Recovery Loan Scheme ending on 30 June 2022.”
Rishi Sunak announced the extension of the Recovery Loan Scheme (RLS) during the Autumn Budget, enabling funding for SMEs at a reduced cost and making available loans that lenders would struggle to fund as part of their everyday “business as usual” policies.
However, despite these efforts, Mr Gupta warned additional tax changes elsewhere will hit workers and must be factored into planning. SMEs will need to “take advantage” of the schemes available to them while they can as they will face higher costs from 1.25 percent increases to National Insurance Contributions from April 2022, rising corporation tax from 2023 and predicted changes to Inheritance Tax (IHT) and Capital Gains Tax (CGT).
What is keeping entrepreneurs up at night?
This week, the The Accountancy Partnership also released its latest SME Business Owner Mental Health Report. The results showed that being unable to provide their product or service as planned was the primary fear for 40 percent of small business owners in the face of supply chain issues, the current staffing crisis and rising energy bills.
Additionally, financial fears have led to sleepless nights for almost a third (30 percent) of small business owners, as they are concerned about the prospect of being unable to pay their personal rent or mortgage.
Lee Murphy, the managing director at The Accountancy Partnership, noted the results were disappointedly predictable.
He said: “Running a business of any size comes with pressures that can evolve into stress and other mental wellbeing issues, but as SME owners often rely on their business as a sole source of income and have a close relationship with employees, these worries can be felt more keenly.
“Many entrepreneurs found their livelihoods threatened with the onset of the pandemic as the world changed overnight, and anxieties would have spread even further for those who have employees. While the statistic revealing that the majority of SME owners’ mental health was at least moderately impacted by the pandemic is concerning, it is not necessarily surprising.”
How many people will be affected by SEISS repayments?
While a large number of self-employed workers will not have to worry about repayments, millions of freelancers could still be affected.
Last month, HMRC released statistics on the fifth set of grants made up to September 15, 2021. The data showed £27.7billionn has been paid in SEISS grants in total.
Across the five grants, 2.9 million individuals had received a grant and 10.2 million total grants were claimed.
Around five million individuals reported self-employment income for the tax year 2019 to 2020, and had their data assessed for potential SEISS eligibility.
Via this process, 3.3 million self-employed individuals were identified as potentially eligible for the fifth grant. HMRC noted around 1.7 million fifth grant claimants were found to be ineligible.
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