The Self-Employment Income Support Scheme (SEISS) was made available to provide financial support for individuals who are self-employed or a member of a partnership, who meet the eligibility conditions and have been adversely affected by coronavirus (COVID-19). The scheme for the fifth grant is due to open shortly. HM Revenue & Customs (HMRC) will be contacting those taxpayers who are eligible, based on their tax returns, in mid-July and the online service to claim the fifth grant will be available from late July 2021.
The fifth SEISS grant is intended to help those taxpayers who think that their business profit will be impacted by COVID-19 between 1 May 2021 and 30 September 2021. Claims must be made on or before 30 September 2021.
There is however a change in the rules from the previous SEISS grants. The level of grant an individual can receive will now depend on whether the taxpayers turnover has dropped by more or less than 30%. Tax payers will need to provide two turnover figures as part of the application process.
The general eligibility criteria are unchanged from those of the fourth grant and individuals can claim the fifth grant even if they did not apply for the one of the previous four grants.
Who can make a claim?
Individual taxpayers can make a claim for SEISS if they meet the following conditions:
- they traded in the tax year 2019/20 and submitted their Self-Assessment tax return on or before 2 March 2021 for that year;
- they traded in the tax year 2020/21;
- they intend to continue to trade in the tax year 2021/22; and
- they are either currently trading but are impacted by reduced demand due to coronavirus, or are temporarily unable to trade due to coronavirus.
Tax payers will be required to declare that they intend to continue to trade and reasonably believe they will have a significant reduction in their trading profits due to the impact of COVID-19 in the period from 1 May 2021 to 30 September 2021.
Eligibility for the scheme:
If taxpayers have established that they can make the claim, the conditions for eligibly for SEISS are initially based on their 2019/20 Self-Assessment tax return trading profits as follows:
- They must be no more than £50,000;
- They must be at least equal to non-trading income;
- If they are not eligible based on the 2019/20 Self-Assessment tax return, HMRC will then look at the tax years 2016/17, 2017/18 and 2018/19.
Taxpayers can access HMRC’s eligibility checker on the following link https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference where taxpayers will be required to add their Tax Reference UTR and National Insurance number.
How much will be paid?
Taxpayers will get a taxable grant based on their average trading profit over the 4 tax years; 2016/17, 2017/18, 2018/19 and 2019/20. HMRC will work out the average trading profit by adding together the total trading profits or losses for the 4 tax years, then dividing it by 4. The grant will be 80% of their average monthly trading profits, paid out in a single instalment covering 3 months, and capped at £7,500 in total for those individuals whose turnover has reduced by 30% or more.
For those tax payers with a turnover reduction of less than 30% they will receive a grant based on 30% of three month’s average trading profits, capped at £2,850. The online service will tell the individual how HMRC have worked the grant out when the application is made.
Claimants will need to provide two turnover figures during the claim process, and it is advisable to have these two figures available before starting to make the claim. The two figures required are for:
1. The pandemic period
The turnover figure required is for a 12-month period starting on any date between 1 and 6 April 2020. Those who prepare accounts on a tax year basis will be able to use the same figure as will appear on the 2020/21 tax return (it is not necessary to submit the return before making a claim, but the turnover figure for the SEISS claim will be checked after the return is filed). Those with a different accounting date will need to make a separate calculation. The turnover figure should be for all of the taxpayer’s businesses, but excluding COVID-19 support payments (such as: SEISS grants, eat out to help out payments and local authority/devolved administration grants).
2. The reference period
In most cases this will the turnover figure from the 2019/20 tax return but there is an option to use 2018/19 if 2019/20 was not a normal year for the business. The turnover figure can be adjusted if the accounting period was longer or shorter than 12 months but there is no requirement to make an adjustment if the period covered is less than 12 months because the business started or ceased in that tax year (this can mean that the comparison is not between two 12-month periods).
Those who started trading in 2019/20 and did not trade in any of the tax years 2016/17, 2017/18 or 2018/19 will not be required to provide turnover figures and will receive a grant based on 80% of trading profits.
Partners will need to provide turnover figures for the partnership as a whole unless they also have turnover from other trades, in which case they can use their share of the partnership turnover.
How does a taxpayer make a claim?
Taxpayers will need to have the following details to hand to make a claim:
- Self-Assessment UTR;
- National Insurance number;
- Government Gateway user ID and password;
- Bank account number and sort code you want HMRC to pay the grant into. This must be a bank account details where a Bacs payment can be accepted.
Individuals will also have to confirm to HMRC that their business has been adversely affected by coronavirus on or after 1 May 2021 and if the grant is claimed HMRC will treat this as confirmation they are below the state aid limits.
As for the first four grant agents will be unable to make a claim on behalf of taxpayers so individuals will need to make their own arrangements to make a claim.
Practical issues to consider when making a claim for SEISS:
- If taxpayers have other income such as from pensions, rental profits or large dividends they may not be eligible;
- Those that are not eligible for SEISS may need to seek alternative support;
- The claim must be completed personally as it is not possible for agents to process the claim on their behalf;
- If individuals do not have a Government Gateway ID it can created when they make a claim;
- HMRC will check claims and take appropriate action to withhold or recover payments found to be dishonest or inaccurate;
- Anyone unable to claim online can use a telephone based application, further details are awaited;
- The grant will be included as taxable income in 2021/22;
- Individuals must keep any evidence that their business has had either reduced activity or been unable to trade due to coronavirus;
- If an amendment to a tax return on or after 3 March 2021 lowers the amount an individual is eligible for, then they must inform HMRC within 90 days.
If the taxpayers business recovers after a claim is made, their eligibility for the grant will not be affected since the claim is based on a taxpayers reasonable belief that their trading profits would have been significantly reduced at the time of making the claim. Again tax payers must keep evidence to support this.
This is only an outline of the SEISS and further details about the claim can be found at https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme.
If you have like more information or if you require assistance in determining your eligibility for the fifth SEISS grant please speak to your usual contact at the firm.
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