How to explain a grant received under the Coronavirus Job Retention Scheme or Self-Employment Income Support Scheme

This article describes how to explain any payments you receive from HMRC either for furloughed employees under the Coronavirus Job Retention Scheme (CJRS) or through the Self-Employment Income Support Scheme (SEISS) in FreeAgent.

The final month of the CJRS ended on 30th September 2021. Employers must submit claims for employees who were furloughed during September 2021 on or before 14th October 2021 and must make any amendments on or before 28th October 2021.

After 28th October 2021, the CJRS scheme will be fully closed and employers won’t be able to make further claims. More information about the Coronavirus Job Retention Scheme is available on the government’s website.

The fifth and final application window for the SEISS closed on 30th September 2021 and from October 2021, business owners will no longer be able to claim financial support using the SEISS. More information about the Self Employment Income Support Scheme is available on the government’s website.

Please note that you will need to treat any payments received under the CJRS or SEISS as part of your business's income by following the steps below. The purpose of both schemes is to help fund your business's normal day-to-day activities which means that you will have to work out how much tax is due on this income. You’ll then need to complete the relevant box on your Self Assessment tax return.

If you receive a bank loan as part of the Coronavirus Business Interruption Loan Scheme (CBILS),or the Bounce Back Loan Scheme (BBLS), you'd need to treat it like any other loan and follow the steps in this article instead.

Explaining grant money paid into your bank account

To explain a grant received through either the CJRS or SEISS scheme, navigate to the 'Banking' tab at the top of the screen and select 'Bank Accounts' from the drop down menu.

Choose the relevant bank account from the list.

Select the transaction that you would like to explain.

Select ‘Other Money In’ from the ‘Type’ drop-down menu.

Select ‘Grant Income’ from the 'Category' drop-down menu and enter the name of the scheme into the 'Description' box if you wish.

Alternatively, you can set up your own income category for these transactions. Be aware that these particular grants are outside the scope of VAT as they don't relate to any goods or services that your business sells.

Select ‘Explain Transaction’ to complete the process.

A record of the bank transaction being explained will appear in your Audit Trail report.

Completing the relevant box on your Self Assessment tax return

If you’re a sole trader and received coronavirus support scheme payments (such as SEISS or CJRS) and have declared these as part of your business’s income, you’ll need to select ‘Yes’ to box 20.1 on your Self Assessment tax return in FreeAgent.

For more information, please see this article.

If you’re a limited company director and received coronavirus support scheme payments (such as CJRS), you’ll need to select ‘No’ to box 20.1 on your Self Assessment tax return in FreeAgent. This is because the grants in this case are reported as part of the company’s profits on its tax return, rather than as part of your personal income on your tax return. This applies even if the grants were paid to you in the form of furlough wages as wages and profits are different kinds of income.

For more information, please see this article.