HMRC have this morning, 6th July, released the guidance of the fifth and final grant of the Self Employment Income Support Scheme.
Are you eligible to claim?
Claimants reasonably believe that they will suffer a significant reduction in their trading profits due to reduced business activity, capacity, demand or inability to trade due to COVID-19 between the period 1 May 2021 and 30 September 2021.
Claimants must also satisfy the following three-step criteria:
1. Your trading status and when you must have traded
You must be a self-employed individual or a member of a partnership. You must also have traded in both tax years:
- 2019 to 2020
- 2020 to 2021.
Those who trade through a limited company or a trust cannot claim the grant.
2. Tax returns and trading profits
Claimants must have:
- Submitted their 2019 to 2020 tax return on or before 2 March 2021
- Trading profits of no more than £50,000
- Trading profits at least equal to your non-trading income.
Non-trading income is any money that claimants make outside of their business, i.e. if claimants also have a part-time job or pension. If claimants are not eligible based on their trading profits in their 2019 to 2020 return, HMRC will look back at previous years.
HMRC will contact claimants in mid-July if they are eligible for the grant based on their previous tax returns (more information below). Further information about how HMRC works out trading profits and non-trading income.
3. Deciding if you can claim
Claimants must confirm that they:
- Intend to keep trading in 2021 to 2022
- Reasonably believe there will be a significant reduction in their trading profits due to the impact of COVID-19 between 1 May 2021 and 30 September 2021.
How different circumstances affect the SEISS 5th grant
There are some circumstances that affect eligibility, including the birth of a new child, claimants that have loans covered by the loan charge provisions, or claimants that are non-resident. Full details can be found here how your circumstances affect your eligibility.
Information needed to claim the SEISS fifth grant
The fifth grant is different from previous grants. In most cases, when claiming, applicants will need to provide details of their business turnover* so HMRC can calculate the grant amount. Claimants will need to have 2 different turnover figures:
- Turnover for the 12-month period starting between 1 April 2020 and 6 April 2020
- Turnover for either 2019 to 2020 or 2018 to 2019
HMRC will compare these two figures when calculating grant awards. Claimants can find their turnover figures from any of the following methods:
- Checking their 2020 to 2021 Self-Assessment tax return
- Their accounting software
- Checking their bookkeeping or spreadsheet records that cover their self-employment invoices and payments received
- Checking the bank account used for their business, to account for money coming in from customers
- Asking their accountant or tax adviser.
What cannot be included as income
- Anything reported as any other income on tax returns
- Any other COVID-19 support payments i.e. previous SEISS grants, Eat Out to Help Out payments, local authority or devolved administration grants.
There is further guidance about how to calculate turnover here: Work out your turnover so you can claim the fifth SEISS grant – GOV.UK (www.gov.uk)
*When you do not need to provide details of business turnover
HMRC will not ask for any turnover figures if trading started in 2019 to 2020 and claimants did not trade in the following tax years:
- 2018 to 2019
- 2017 to 2018
- 2016 to 2017.
In either circumstance, claimants must retain evidence that shows how their business has been impacted by COVID-19 resulting in less business activity than otherwise expected. HMRC expects claimants to make an honest assessment about whether they reasonably believe their business will suffer a significant reduction in profits. Full details of what is meant by ‘reasonable belief’, ‘significant reduction’, and ‘reduced activity, capacity and demand’ can be found here.
How much will claimants receive?
This depends. Where claimants need to tell HMRC about their turnover, there are 2 levels of grant. HMRC will calculate the grant amount based on how much a claimant’s turnover has decreased by after they have compared the following two turnover figures:
If your average trading profits were £42,000 over the last 4 tax years, then:
- Starting with the claimant’s average trading profit (£42,000)
- Divide by 12 = £3,500
- Multiply by 3 = £10,500
If claimants are eligible for the higher grant:
- Calculate 80% of £10,500 = £8,400
- Claimants will get the maximum grant of £7,500
If claimants are eligible for the lower grant:
- Calculate 30% of £10,500 = £3,150.
- Claimants will get the maximum grant of £2,850.
Where claimants do not need turnover figures to claim
They will receive 80% of 3 months’ average trading profits. The maximum grant amount is £7,500. Find out more information on how HMRC work out your trading profits.
How and when to make a claim
The online service for the fifth grant is now open and can be accessed here.
Claimants should have been contacted by HMRC (either by text, email, letter or a notification via the online service) around mid-July with a date that they can make their claim from. Claimants should be cautious of suspicious texts calls and emails. A list of genuine HMRC contacts can be found here.
How the grant is treated
The grant is subject to Income Tax and self-employed National Insurance Contributions. It must be reported on a claimant’s 2021 to 2022 Self Assessment tax return. The grant also counts towards annual allowance for pension contributions. SEISS grants are not counted as ‘access to public funds’ therefore the grant can be claimed on all categories of work visa.