HMRC on Auto-Correct with Tax Returns
PERSONAL TAX ACCOUNTANTS IN MANCHESTER
Tax returns auto-corrected for SEISS grants
HMRC is automatically correcting tax returns where the total of declared SEISS grants don’t match what HMRC thinks the taxpayer has received, but those auto-corrections can be challenged.
As AccountingWEB reported in May, HMRC had to stall the processing of many 2020/21 self assessment tax returns where the return included, or should have included, a report of a self-employment income support scheme (SEISS) grant.
Processing of these 2020/21 returns resumed on 19 May 2021 when HMRC introduced a fix to prevent some tax returns being incorrectly flagged as containing errors relating to SEISS grants.
On 19 June 2021 HMRC set its computer to automatically correct 2020/21 tax returns received from that date, where the total amount reported of SEISS grants received in that tax year doesn’t match HMRC’s records. It will take HMRC some time to process all of the tax returns submitted before 19 June, as some manual intervention is required to adjust for SEISS grants.
HMRC has the power to correct a self-assessed tax computation for ‘obvious errors or mistakes’ within the return, without opening a formal tax enquiry. This correction should be done within nine months of the date the tax return is filed.
The taxpayer should receive a notice of this correction to their self assessment on a form SA302 and a covering letter from HMRC. Your Accountant should also receive a copy of this notification.
What to do next
Firstly, if you don't already get in touch with an Accountant or an accountancy firm for support and advice. You can give us a call if you wish, as we provide a free consultation, and our passion is to help businesses with their financials. However, should this happen to you, you're not obliged to accept this auto-correction on your tax return, and can reject it within 30 days of the date of the correction notice issued by HMRC. Any rejection should be made in writing to HMRC, rather than by phone, stating the reasons why you are rejecting it.
Before you examine the tax return correction you need to be certain about the amount of SEISS grant you've received. The best way to do this is to check your bank statements for the year to 6 April 2021. Also ask yourself if you have since repaid any of the SEISS grants received.
There are five circumstances which may have prompted the auto-correction, which require different reactions:
1. Omitted SEISS grant
Where one or more of the first three SEISS grants were omitted from the 2020/21 tax return, you should accept HMRC’s auto-correction, if and only if the total of the SEISS grant figure is correct. If the total on the correction does not agree with your amounts, again, consult us first and we will contact HMRC to dispute the amount of the correction.
2. Grants in wrong box
The SEISS grants generally need to be reported separately to the turnover for the business, and must be included on your tax return for the year in which they are received. There is an exception for some partnerships, where the grant has been paid to the partnership and not to the members of the partnership.
Where the SEISS grant was declared in the wrong box in the return, but the amount was correct, you should accept the auto-correction. You will also need to amend your tax return to remove the SEISS grants from where they were erroneously included on the return.
3. Different grant total
Where the amounts reported on the tax return do not match HMRC’s figures in the auto-correction you need to double check the totals against the taxpayer’s bank records. Then either accept or dispute HMRC’s correction.
4. No SEISS grants received
Where you are adamant that you did not claim a SEISS grant, and did not receive a grant, but an auto-correction suggests that a grant was claimed fraudulently using your personal details, contact HMRC urgently on 0800 024 1222.
5. No self-employment
If the 2020/21 tax return has been submitted without a completed section for self-employed income or partnership income, HMRC will logically conclude that you did not trade in 2020/21; in which case you wouldn't have been eligible to take up SEISS grants. HMRC will correct the tax return to recover all of the SEISS grants paid to you in 2020/21.
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