Repaying the Self-Employment Income Support Scheme

The Self-Employment Income Support Scheme has been a lifeline for many of those that are self-employed. But what happens in the circumstance that the grant needs to be repaid? rradar tax specialist Caroline Lamyman looks at the options.

In what circumstances would the self-employment income support scheme grant need to be repaid?

HMRC expect to be notified when an individual has made a claim when they were either not eligible for the grant or received more than HMRC said they were entitled to.

What does ‘eligible’ mean?

You can claim the grant if you are a self-employed individual or a member of a partnership and your business has been adversely affected by coronavirus.

Your business could be adversely affected by coronavirus if, for example:

You are unable to work because you:

• are shielding

• are self-isolating

• are on sick leave because of coronavirus

• have caring responsibilities because of coronavirus

You have had to scale down, temporarily stop trading or incurred additional costs because:

• your supply chain has been interrupted

• you have fewer or no customers or clients

• your staff are unable to come in to work

• one or more of your contracts have been cancelled

• you had to buy protective equipment so you could trade following social distancing rules

More examples from HMRC on how a business is ‘adversely affected’ can be found HERE.

Are there any deadlines for notifying HMRC?

This depends on the date the individual received the grant.

If it was received:

• before 22nd July 2020, the individual must tell HMRC on or before 20th October 2020

• on or after 22nd July 2020, they must tell HMRC within 90 days of receiving the grant

How do I pay back any overpayments?

You will need the Government Gateway user ID and password that was used when the claim was made, along with the grant claim reference, found on the copy of the grant claim acknowledgement, and the Self-Assessment Unique Taxpayer Reference (UTR) number.

Use the Government Gateway user ID and password that you used when you made your claim to tell HMRC an overpayment has been made. If you are unable to pay back the grant online, you should contact HMRC for help.

Once the form has been completed, HMRC will give you the bank details to pay back the grant. It is advisable to print or save this page so it can be referred to if HMRC make any enquiries. HMRC should only contact individuals if they need more details or if there is a problem with the payment.

How will HMRC recover any overpaid amount of grant if I cannot pay it back online?

HMRC may recover the full amount of the overpaid grant by making a tax assessment for the amount to which you were not entitled and have not repaid. If they make an assessment, you will receive a letter from HMRC.

The payment will be due 30 days after the assessment is dated and HMRC will charge interest on late payments. They may also charge you late payment penalties if the amount remains unpaid 31 days after the due date.

If you are worried about making the payment, call HMRC’s dedicated Payment Support Service on 0300 200 3835. You should still notify them that you have been overpaid.

If you do not repay the grant and HMRC have not made an assessment by the date you submit your 2020/2021 Self-Assessment tax return, you must separately include in your return details of the grant to which you were not entitled and you will repay the grant through the tax return. HMRC will provide further guidance in the tax return notes and help sheets.

Are there any penalties for not notifying HMRC?

The short answer is yes, the individual may have to pay a penalty if HMRC are not notified.

You can find out more about when you may have to pay a penalty and other information, including:

• how HMRC decides how much the penalty will be, which could be up to 100% of the grant amount

• when you will not have to pay a penalty

• how to appeal against a penalty

You can also notify HMRC if you want to voluntarily pay back some or all of the grant you have received. You can do this at any time.

How can you make an appeal to an assessment?

If you do not agree with the decision or the amount due, you may appeal within 30 days from the date the notification was issued to you.

For detailed guidance on appeal rights see factsheet HMRC1.

Are there any provisions specific to partners and partnerships?

If an individual partner receives a grant to which they were not entitled and keeps the entire amount, HMRC will assess only that partner on the amount of the grant to which they are not entitled. If the amount is not repaid and HMRC have not issued an assessment, that partner must report the overpaid amount separately in their 2020/2021 Self-Assessment tax return. If they fail to notify HMRC of a grant to which they were not entitled within the notification period, that partner alone will be charged a penalty.

What if the partner paid it over to the partnership?

If the amount of grant to which the partner was not entitled is not kept by the individual partner, but instead paid over to the partnership, HMRC may assess any of the partners to collect the amount due as Income Tax. The partners will be jointly and severally liable for the amount assessed.

HMRC may assess any partner for the whole amount of a single penalty chargeable for a failure to notify. However, partners are jointly and severally liable to a Failure to Notify penalty charged in relation to a partnership.

If any partner knew that they were not eligible for a grant which was paid into the partnership and all other partners are taken to have known as well, the Failure to Notify penalty will be calculated using the percentage ranges for deliberate and concealed behaviour. Any penalty will be based on the amount any of the partners were not entitled to receive and did not repay by the last day of the notification period. HMRC may still charge a penalty if any of the partners repay the amount of grant not entitled to after the end of the notification period.

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Looking for more advice or guidance on this matter, or any other business-related issue?

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