HMRC reclaiming Income Support Scheme Grants

HMRC reclaiming Income Support Scheme Grants

Widely criticised for not being implemented quickly enough the Self-Employed Income Support Scheme was introduced to assist sole-traders whose income have been adversely affected. However, as slow as HMRC were to introduce the scheme it seems that they are not so slow at requesting its repayment. HMRC is especially focused on the fifth round of grants issued in September 2021. 

Finance Act 2020 introduced requirements for individuals who wrongly claimed amounts to make full repayment. Failure to do so could result in HMRC taking recovery action along with charging penalty and interest. 

Do I need to repay my grant?

As the SEISS payments were grants and not loans there is no requirement to repay them. However, there are some circumstances whereby you may need to repay the loans even if HMRC’s eligibility checks indicated that you were illegible. This is due to the way the eligibility checks worked focusing on data from the submitted tax returns and not the surrounding circumstances. 

It is therefore possible that HMRC has authorised SEISS payments where the claimant may not have been eligible. For example:

  • The trade was not adversely affected by COVID19
  • The trade in question ceased or you started operating under a ltd company during 2019/20
  • There was no intention of continuing the trade when making the claim

Where any of the above apply then the individual will need to contact HMRC and pay back the amount received in full. Even if the claim was made due to a misunderstanding of the rules in place. 

Notwithstanding the above, it is possible for one or more of the above conditions to be met and the SEISS claim to still be valid. This is because eligibility is based on the facts at the time of the claim and receipt of the grant. For example it is possible that an individual may have changed their mind about continuing their trade subsequent to receipt of the grant, however, provided that at the time of the claim they intended to continue the trade. 

Notifying HMRC and penalties

Where you have received a grant which you were not entitled to then you have 90 days after receipt of the grant to make the repayment. Failure to meet this deadline could result in failure to notify penalties of up to 100% of the amount not repaid. 

HMRC also has the power to charge penalties under the general failure to notify rules in FA 2008. However, they will only charge a penalty in these circumstances where the amount has not been repaid by 31 January 2022. 

Next Steps

We have already seen a number of protracted enquiries throughout 2020 into the SEISS grants. Although none of our clients have had to repay any of their grants. Proving your eligibility can be tough as it requires evidence of the mindset of the claimant at the time the claim was made and the grant received.

For those who have received the fifth round of SEISS we strongly advise that the applications are reviewed before the 90 day anniversary of the receipt of grant. For those individuals who have applied for the SEISS grants based solely off HMRC’s eligibility test, it is more important due to the failures in the test as mentioned above to have them review to ensure that none should be repaid. 

If you or someone you know would like to discuss any of the above or would like us to review the SEISS grants you have received then call us on 01442 97 44 99 or email info@hawthorneconsultancy.com

  • Self Assessment Tax Returns
  • tax
  • HMRC
  • Sole Trader
  • covid 19

I started Hawthorne Consultancy Services in 2019 as a way to provide individuals and businesses with affordable tax planning and tax investigation representation.


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