Hi
can anyone tell me how to input / tag the covid-19 grant for self employed please.
very new to doing my own taxes.
thanks
Tag it as something not in this list. And pick misc income.
You can set up a new code for it if you like, but make sure to create it in the sales range of codes, i.e. in the range 4000-4999. However, 4900 would also be fine.
I processed an “HMRC SEISS GRANT” last week using the nominal ledger code 4900 Miscellaneous Income but rather than creating a new sales invoice did a purchase credit note (Supplier account: hmrc.gov.uk), if you are VAT registered the receipt would need to tagged as “OUT OF SCOPE”. The reason for processing the payment received through the Purchase ledger rather than the Sales ledger as this reports the receipt in a more logical fashion.
The nominal ledger account 4900 Miscellaneous Income is a default account that is distributed to all when creating a QuickFile account and as such is a “System account name cannot be modified” with a grey gear-wheel
I deleted this system account 4900 and then re-created the same nominal ledger with the same description. This allows for the grey gear-wheel to become active for the option to choose that this account can be used for "Allow this code to be used in purchase invoices"
Ticked the box which then allowed for a “Log a Purchase” as a credit note for the grant but this was accounted to a Sales ledger nominal ledger, after the credit note was created the N/L 4900 was returned to the default position i.e. unticked “Allow this code to be used in purchase invoices” as not usually required for purchases, but can be reactivated for such an unusual transaction.
The grant application created a purchase credit note assigned to 4900 Miscellaneous Income and was raised the day the online application was made and paid down to the Proprietor Drawings Account (1202) on the 16/05/2020 and then the money received into the current account on the 20/05/2020 was also transferred to the Proprietor Drawings Account.
Of course you could just issue a Sales invoice to account for the money and not do the extra steps that I have followed but I consider dealings with the Tax Office are more appropriately assigned as purchases rather than sales.
I was surprised how straightforward completing an application for the grant with HMRC, hoping for light at the tunnel and business maybe allowed to continue trading as before the outbreak of COVID-19 as soon as possible.
It’s far simpler just to tag the bank transaction to the nominal code via “something not on the list” - no need to create any sale or purchase invoice, no separate payment transaction, and direct tags like that without an invoice/purchase never figure in the vat return anyway so no need to mark anything out of scope.
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You should not be raising invoices or credit notes for this income - it is a grant which is entirely different from your usual sales.
As @ian_roberts says, just tag it as “something not on the list” straight to the nominal code. If you want to identify it separately, create another code in the same range (i.e. 4000-4999, preferably nearer the 4900s) and call it SEISS grant income.
I hope you don’t do this for every dealing with the tax office. You really shouldn’t be rasing invoices or purchase receipts for anything related to hmrc.
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Yes all dealings with HMRC have a purchase invoice raised. I have found that having an invoice to attach the relevant documents especially when keeping records for Tax Returns is helpful and does not interfere with the general purchases in the ledger. Any tax/national insurance liabilities that are accounted for on a return are approprately recovered and paid down to the Proprietor Drawings Account. @ian_roberts has provided the most basic method of how to process the grant which works very satisfactorily except there is no way to file the papers particular to the grant and so my solution is of course more complicated but allows for that option.
Of course there’s a way to file the grant info on your tax return. Because it will show at the very top of the profit and loss as misc income.
We do not know as yet how the tax return for 20/21 will be formatted to account for the grant but its likely to be a seperate box to both turnover and other income.
But whatever makes it easier for you I guess.
HMRC are not a supplier and therefore you should not be raising purchase invoices. Purchase invoices are a specific type of document and are issued by suppliers. HMRC do not issue invoices. If you do it this way, and have a balance due, it will put HMRC into trade creditors which is completely incorrect.