Now that we are into a new tax year, companies and self-employed individuals are preparing and submitting their annual tax returns to HMRC. However, are you aware of the new entries on the tax return forms covering the period since April 2020? The changes are in response to COVID-19 support grants claimed since last April. In this week’s blog, Cloud 360 Accounting CEO and Founder Kieran Phelan explains the new changes to the forms….
Changes to the HMRC Form
The government has dished out a huge amount of financial support to businesses during the pandemic. There will be some cases where grants have been claimed in error or perhaps intentionally. No matter the reason how or why grants have been claimed incorrectly, HMRC want to know. As such, they have added more boxes for completion to tax returns. Back in November we discussed some ways HMRC where checking on businesses in this blog post. These boxes are giving taxpayers the opportunity to tell HMRC about any grants claimed wrongly. The grants are then paid back to HMRC as part of the annual tax return. Let’s explore the changes to each form for each type of business and consider its impact…
Changes for Limited Companies
Limited companies are required to submit an annual company tax return to HMRC accompanied by corporation tax computations and statutory accounts. The company tax return is known as form CT600.
There is a new section on CT600 forms which directly relates to coronavirus support received during the relevant accounting period.
For example, if your company year-end is 31 December, your CT600 for the 2020 year will need to include a section disclosing:
- Coronavirus Job Retention Scheme (CJRS) and Job Support Scheme (JSS) received
- Coronavirus Job Retention Scheme (CJRS) and Job Support Scheme (JSS) entitlement
- CJRS and JSS overpayment already assessed or voluntary disclosed
- Job Retention bonus (JRB) & Eat Out To Help Out (EOTHO) overpayments
- Total Coronavirus Support Schemes
The onus is always on the taxpayer to complete tax returns accurately (i.e. the limited company and its directors in this case). This section seems to be an opportunity to tell HMRC about the correct ‘entitlement’ to CRJS and JSS alongside how much was actually paid out in that year. If you now believe you assessed your entitlement wrong, it is a chance to make the correction on the tax return.
Our understanding is that HMRC will pick up these details when processing the CT600 and request repayment of any grants overpaid.
The screenshot below shows the relevant page on form CT600. In this example, the company is showing £4,500 of CJRS grants overpaid. This will be repaid to HMRC at the same time as corporation tax is paid over.
If taxpayers don’t make a disclosure of grants claimed incorrectly and overpaid, this will be penalised heavily in the future if HMRC carry out a compliance check on the company tax return and discover this for themselves!
How the tax return changes impact the self-employed
Everyone registered for Self Assessment with HMRC will be familiar with completing their tax return each year. The form itself is known as SA100. Again, there is a new section on SA100 forms which directly relates to coronavirus support for the 2020/21 tax year.
Here is what HMRC are asking taxpayers to disclose:
· Amount of CJRS grant (s) incorrectly claimed
· Amount of Job Retention Bonus incorrectly claimed
· Eat Out to Help Out Scheme payments incorrectly claimed
· Partnership share of Coronavirus support payments incorrectly claimed
· Total Coronavirus Support Scheme payments incorrectly claimed
· Amount of Self Employed Income Support Scheme (SEISS) incorrectly claimed
As you can see, there are additional aspects for self employed taxpayers to consider. The wording is really specific – what have you incorrectly claimed. It’s an opportunity to tell HMRC about any incorrect claims and allow for repayment of such grants as part of your tax return to HMRC.
The screenshot below shows the page of form SA100 where you can enter these details. In the example shown, the taxpayer is disclosing £2,000 of SEISS grant incorrectly claimed. This figure then forms part of the amount to be paid to HMRC along with any tax due for the year.
Our understanding is that HMRC will pick up these details when processing and request repayment of any grants overpaid.
WHAT YOU NEED TO DO
Our advice is that you should review all government support received by the business since March 2020 onward and ensure you have met all the necessary criteria. If you think you’ve made a mistake, then you should work out the amount overclaimed and include the entry on your annual tax return to HMRC.
You can be assured that HMRC will come down hard on anyone found to have claimed grants incorrectly and NOT made this disclosure.
We understand that the rules and criteria were often rushed out and people were in panic mode. Treat this as an opportunity to review your position and do the necessary – if you need to. Remember that funds going back to Treasury may be needed by others in need.
As always, get professional advice before submitting your tax return to HMRC. Your accountant may be able to help save you some money as well as helping you do the right thing! If you want to chat to us about any concerns you may have on your upcoming tax return you can contact us on: firstname.lastname@example.org