We sort your Self Assessment for you. £119, all in.

Fast, effortless and 100% online.  Learn more

We sort your Self Assessment for you. £119, all in.

Self-employed? You may have to repay SEISS grants

  • 5 min read
  • 8 Apr 2021
You may have to pay back SEISS grants

In 2020, around 5 million people had their data assessed to claim SEISS grants. And based on this, 3.4 million of the self-employed were found to be eligible for the first grant. 

And now, true to the world of HMRC, there’s been some confusion. 

If you’ve not heard of SEISS grants, SEISS stands for Self-Employed Income Support Scheme. The government introduced grants for the self-employed whose income was affected by COVID-19. There have been three grants so far and the fourth will be available to claim from April 2021.

How does the scheme work?

The first three grants covered between 70-80% of your income up to £7,500 per month. The fourth scheme will be the same and the fifth will be reduced on a sliding scale, although full details of this grant will be released later in the year. 

Read more about how the SEISS grant works here. 

Is SEISS a loan?

No, it’s not. It’s a grant so you shouldn’t have to pay it back.

But did you know you owe tax on SEISS?

What you may not have realised is that even though the grant is not something you have to pay back, you owe tax on it like you would on any other income. You’ll therefore have to pay tax on it via a tax return. 

And you might have to pay the grants back

The only circumstance in which you’d have to repay the grants is if they were claimed when you weren’t eligible. How could that be, you ask? Unfortunately, the full scope of conditions that checked whether or not you were eligible weren’t covered in HMRC’s eligibility checks. 

Their checks were based on whether you’d submitted your 2018/19 tax return and your trading profits up until that point. What they didn’t take into account was whether your income was affected by the impact of the pandemic.

You were therefore able to claim a SEISS grant even if you weren’t eligible. 

But bear in mind that you were eligible if you claimed in the reasonable belief of reduced demand. There’s also no need to worry if you had evidence (such as reduced business over the first and second grants) of any adverse effect.

Construction workers, you may not get a CIS rebate

When you work in construction, you’re most likely part of the Construction Industry Scheme (CIS). It’s a government scheme that ensures that subcontractors are taxed correctly. Through the scheme, construction workers usually overpay what they owe and so have a tax rebate to claim from the start of each tax year. 

However this year, because so many construction workers were able to claim the SEISS grant, you potentially won’t have a rebate to claim and you may even owe money instead. 

The construction industry was the sector with the highest number of potentially eligible workers and was responsible for the highest number of claims, HMRC found. But in reality, construction was one of the industries that wasn’t massively impacted by the pandemic. This meant that some construction workers weren’t eligible to claim the grants, but were still able to. 

How do I know if I wasn’t eligible?

You should think about which grants you claimed, when you claimed them and why:

  • Was your trade negatively affected by COVID-19 when you claimed, or did you have good grounds to believe that it would be?
    • First grant 👉 March – 13th July 2020
    • Second grant 👉  August, September and October
    • Third grant 👉 November, December and January
    • Fourth grant – read more via HMRC
  • Were you still working?
  • If you stopped trading, was it already the plan outside the pandemic?
  • When you claimed, were you hoping to continue trading?

Don’t worry if you claimed and then your situation changed. This doesn’t make you ineligible – and HMRC won’t penalise you for not applying hindsight!  You’ll only need to notify them if you claimed SEISS despite not having experienced any loss of business at the time of your claim.

Here’s an example of what is OK versus what isn’t

👍

Your income dropped by 100% back in March 2020 so you claimed the first grant. Then by June your income went up so you didn’t claim the second grant. Overall, it turned out that you had the best year ever. But even so, you don’t need to pay back your first grant because at the time you claimed it, your income had been negatively affected.

👎

Your income dropped by 100% back in March 2020 so you claimed the first grant. Then by June your income went up but you still claimed the second grant. You now feel on reflection that you made the wrong judgement at the time about your business being “adversely affected”. Perhaps you panicked, but now on reflection you feel there was no need to do so.

It’s all about reasonable belief that your claim is valid

Imagine you’re a pub landlord who claims the third grant on 30th November because it appears that your pub will be closed throughout Nov, Dec and Jan. You decide to offer a takeaway service, but believe (reasonably) that this will result in reduced takings.

You receive a takeaway order on 1st December from a Euromillions lottery winner next door for 1,000 magnums of champagne, and end up having your best December on record. 

Your claiming the third grant is still legitimate and it does not need to be returned. HMRC will only challenge why you believed at the time of claiming that your income would be adversely affected.

What can I do if I claimed in error?

If you think you claimed in error, you need to speak to HMRC to let them know. We’d recommend that you do this as soon as you can. You may be charged a Failure to Notify penalty but this can be discussed with them when you call. You can also speak to your accountant for advice on what to do. 

When you get in contact with HMRC, make sure you get in contact via one of these methods:

☎️ Phone

⌨️ Web chat

💻 Online  

You will most likely be billed for whatever you owe in the new tax year. You can find out how much you’ll owe when you file your tax return so we’d recommend getting it submitted as soon as you can after 6th April. 

Do I do a tax return even if I didn’t earn enough in 2020?

If you claimed any of the SEISS grants, then yes. You will need to do a tax return.

Want regular tips from us?

Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.

Category

We sort your Self Assessment for you. £119, all in.

Fast, effortless and done for you online – the way tax returns should be done. Free to sign up.