HMRC confirms grants for the self-employed fraudulent or paid in error

Candice Fourie
Oct 12, 2020 · 3 min read
Photo by Medienstürmer on Unsplash

With the coronavirus bringing the world to a sudden stand still, lock downs being enforced, and work being interrupted, the government responded quickly by putting into place certain offers of support and grants.

The Self-Employment Income Support Scheme, or SEISS, is a measure designed to help self-employed individuals who have been adversely affected by the coronavirus pandemic.

It most certainly has not been a smooth process. From the start, there were hundreds of people that were rejected by the HMRC eligibility tool for the SEISS despite believing they were eligible. Then in August is was discovered that up to 16,000 self-employed people who received Government grants have been paid too much after their payments were miscalculated. HMRC has said up to £258m in grants for the self-employed could have been fraudulent or paid in error, amounting to 1–2% of all Self-Employment Income Support Scheme (SEISS) payouts.

The amount of the grant paid is based on the profits over 3 tax years and the HMRC works out the payments! But they are now saying that in some cases not all information from the tax returns was considered, meaning the grants have been miscalculated.

Even though the HMRC works out the payments, it is up to the individual to spot any problems. So what do you need to do?

Even though the HMRC works out the payments, it is up to the individual to spot any problems. So what do you need to do?

1. Payment difference

If you have received more than originally predicated in your eligibility statement, the HMRC expects you to report this without further prompting.

2. Your business was not adversely affected

To be eligible for the SEISS grant your business must have been adversely affected by coronavirus. Adversely affected is typically when your business has experienced lower income or higher costs due to coronavirus. If your business records don’t show this you will have to repay the grant.

3. Trading

Another qualifying condition of the SEISS is that you need to have traded in the 2019/20 tax year, and you intended to continue your trade into the 2020/21 tax year. You will need to be able to prove your original intention here.

See https://www.gov.uk/guidance/tell-hmrc-and-pay-the-self-employment-income-support-scheme-grant-back

IMPORTANT: You’re required to tell HMRC by the later of 20 October 2020 or 90 days after receiving the SEISS payment.

This grant is specifically for self-employed and partnerships. So, if you have incorporated the business, there will be issues. Please ensure you read HMRC’s guidance on this point carefully and take the appropriate action.

If you don’t notify HMRC within the time limits, HMRC can charge a non-notification penalty. HMRC makes a distinction between deliberate and careless mistakes, and penalties are worse if you’re in the deliberate category.

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