HMRC probes 50,000 Self-Employment Income Support Scheme users

A warning in 2021 to readers of FreelanceUK that the taxman will take compliance with his Self-Employment Income Support Scheme “very seriously,” is finally coming to pass.

In fact, HMRC has started sending letters to 50,000 individuals who it suspects claimed the fourth and fifth SEISS grants, but who appear to have filing anomalies.

To be issued in batches over the next few months, the HMRC letters will hit SEISS users who are yet to file a 2020/21 tax return, or who filed but didn’t include self-employment pages.


Problematically for HMRC, officials won’t always know if the self-employment pages ought to have been filled in, the Low Incomes Tax Reform Group clarified to FreelanceUK.

A sole trader with turnover under the £1,000 trading allowance might still need to complete a tax return, for a different reason unconnected to their self-employment, the charity exampled.

Yet HMRC has other ways to check if fourth and (or) fifth SEISS grant recipients were “eligible” for the help, and that’s the aim of the letters, says LITRG’s Claire Thackaberry.

An accountant whose client used the covid income support scheme, only to be probed by HMRC, shared some details about the SEISS enquiry (which has since been dropped).

'HMRC claimed freelancer didn't continue sole trading'

“The Revenue didn’t accept that my client met the self-employed requirements for the SEISS grant,” the accountant told FreelanceUK.

“HMRC didn’t state my client was ‘employed,’ merely that they didn't qualify on the basis that the individual didn't continue [their] self-employment [after receiving the grant].”

Experts said during the coronavirus outbreak that the ‘intent to continue to trade’ criterion was so strict, that even continuing the business on as a limited company wouldn’t count.

'A window to raise enquiries'

One SEISS expert, Kevin Humphreys of Integrated Dispute Resolution, outlined to freelancers that HMRC scrutiny of ‘excessive’ SEISS grants had a set timeframe to abide by.

"The deadline for filing [2020/21] returns will be January 31st 2022,” Humphreys said at the time to FreelanceUK.

“Freelancers ought to note that HMRC has a window to raise enquiries into declarations covering 12 months from the date the return was received.”

'2020/21 returns target the fourth and fifth SEISS grants'

Responding to questions about the new HMRC letters (which will be staggered but were first issued last month), LITRG’s Ms Thackaberry reflected:

There have already been [HMRC] compliance checks on the first three SEISS grants based on information disclosed on the 2019/20 tax returns.

“[But it is] the 2020/21 tax returns [that] are the prompt for these [now underway] compliance checks and so ‘target’ the fourth and fifth SEISS grants.”

'Complex turnover test to get 5th SEISS grant'

LITRG’s technical officer, Thackaberry recalled that the fourth SEISS grant was calculated in a similar way to the first and third SEISS grants, apart from that it was based on an average of self-employment profits for four tax years (2016/17, 2017/18, 2018/19 and 2019/20).

The first three SEISS grants differed, as they used an average of the profits from the 2016/17, 2017/18 and 2018/19 tax years.

And the fifth grant differed again, as it had a ‘turnover’ test, arguably more “complex” for taxpayers to work out than just using average profits to assess eligibility, Thackaberry said.

'Don't ignore your SEISS letter from HMRC'

The HMRC letters reaching SEISS users require a response with 30 days, rising to 40 days for the initial batch – but only as they were due to be delivered over Christmas.

“Do not ignore the letter,” recommends the LITRG, in an online bulletin on the letters.

“You should respond to HMRC within the timescale set by HMRC.”

'Tell HMRC'

The charity adds: “If you were not trading in 2020/21, you will need to tell HMRC and repay your fourth and/or fifth SEISS grant.

“If you were trading in 2020/21, and believe you were eligible for the fourth and/or fifth grants, you should contact HMRC if you think you did not need to complete a Self-Assessment tax return.”


13th January 2023

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