The self-employment income support scheme (SEISS) was introduced by the government to support self-employed individuals whose businesses were adversely affected by the Covid-19 pandemic. Support is available to both sole traders and partners of a partnership. The first three grants, which covered the period up to 31 January 2021, are now closed and can no longer be applied for but claims for the fourth grant are now open and the fifth grant will be available later in the year.
The fourth grant covers the three-month period between 1 February and 30 April 2021, with an additional 600,000 recently self-employed individuals expected to be eligible for support for the first time as a result of the scope being widened to include 2019/20 tax returns submitted by midnight on 2 March 2021.
HMRC should have contacted you directly if you are eligible to provide a date from which you can submit your claim, with personalised claim dates starting from 22 April 2021. You have until 1 June 2021 to get applications in for the fourth grant. Those individuals who do not receive a claim date either directly or via the claims portal but think that they eligible should contact HMRC on 0800 024 1222 for further advice.
You don’t need to have claimed the first, second or third grants in order to claim the fourth or fifth and as with previous grants the fourth and fifth grants must be claimed by the individual taxpayer and not their tax agent.
How much can I get from the SEISS?
You can get 80% of three months’ average trading profits up to £2,500 per month, or £7,500 in total from the fourth instalment.
Grants one, two and three were calculated using trading profits and losses of the previous three tax years, whereas the fourth grant will also take into account the 2019/20 tax return, and will be calculated using the average trading profits of the four tax years. The inclusion of the results from 2019/20 may result in some individuals who have previously claimed grants one, two and three becoming ineligible so you can’t assume that you will continue to qualify.
Where tax returns were only submitted for 2018/19 and 2019/20, the average monthly trading profits will be calculated using these years only. If a loss arose in one or more years these are deducted from profits when calculating the average trading profits.
A fifth round of SEISS grants will also open sometime in late July to cover the period May 2021 to September 2021.
This will offer eligible individuals the same 80% of three months’ average trading profits, again capped at £7,500 – but only if their turnover has fallen by 30% or more, diverging from how previous SEISS instalments were administered.
Where turnover has reduced by less than 30% the grant will be calculated on 30% of three months’ average trading profits, capped at £2,850.
Who is eligible?
The grant is targeted at self-employed individuals who have “reasonable belief” that their trading profits suffered a “significant reduction” because of the pandemic. You can continue to trade if you claim the grant, but must declare that your business has been impacted as a result of Covid-19 when making the claim.
For instance, someone’s work might have been negatively affected by Covid-19 if they have:
- been shielding or caring for others over the pandemic
- had to scale down because staff are unable to work
- experienced reduced demand for their work because of social distancing and lockdown measures.
To be eligible, trading profits must be no more than £50,000 and equal to or more than any non-trading income, such as dividends and property income. Individuals in partnerships can also claim but must only use their share of the profits to calculate their SEISS claim.
Individuals must have traded in 2019/20 and 2020/21 to submit a claim and must intend to continue trading, claims should not be submitted if you have plans to cease trading.
Individuals who did not submit their 2019/20 tax return by midnight on 2 March 2021 will not be eligible for the fourth grant, unless they fall within one of the exceptions whereby 2019/20 trading profits are ignored. This is regardless of whether or not they were eligible for the first three grants.
Those who earn income from property, including furnished holiday lets, cannot apply for a SEISS grant, nor can individuals who trade through a limited company or trust.
How do I apply for the SEISS?
Applications can be made through HMRC’s online portal, and you should have the following information to hand:
- self-assessment unique taxpayer reference (UTR)
- National Insurance number
- government gateway user ID and password
- UK bank details including account number, sort code, name on the account and address linked to the account.
Records must be kept to prove a business has had reduced activity, capacity or demand, including business accounts and records of reduced/cancelled appointments due to the pandemic.
If a business was temporarily closed, you may want to have a record of dates where it was closed due to Government restrictions, or retain your test results if you stopped working because you had Covid-19.
After a claim has been submitted, HMRC will check it and pay the grant into your bank account within six working days, sending an email to let you know it’s on its way as well.
Remember you must make your claim yourself; asking a tax agent or adviser to claim on your behalf will trigger a fraud alert, which will delay your payment.
Tax Position
The SEISS grant does not need to repaid, however it is subject to both Income Tax and Class 4 National Insurance and must be reported on the relevant tax return.
The grants are taxable in the tax year in which they are received so the first three grants will need to be reported on the 2020/21 tax return. Grants four and five will be received, and therefore taxable, in the 2021/22 tax year.
For any advice regarding the SEISS grants or your personal or business position in general, contact one of the team at Wells.