Support for self-employed
4th and 5th Self Employed Support Grant
Conditions for Fourth SEISS Grant
HMRC Guidance At the Budget it was confirmed that the fourth SEISS grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, capped at £7,500. The fourth grant will take into account 2019/20 tax returns and will be open to those who became self-employed in tax year 2019/20. The rest of the eligibility criteria remain unchanged. Your eligibility for the scheme will now be based on your submitted 2019/20 tax return. This may also affect the amount of the fourth grant which could be higher or lower than previous grants you may have received.
Who can claim
To be eligible for the fourth grant you must be a self-employed individual or a member of a partnership. To work out your eligibility we will first look at your 2019/20 Self Assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income. If you’re not eligible based on your 2019/20 Self Assessment tax return, we will then look at the tax years 2016/17, 2017/18, 2018/19 and 2019/20.
You must also have traded in both tax years:
- 2019/20 and submitted your tax return by 2 March 2021
You must either:
- be currently trading but are impacted by reduced demand due to coronavirus 2020 – Spring 2021 Budget Webinar – 5 March 2021 Page 25
- have been trading but are temporarily unable to do so due to coronavirus You must also declare that:
- you intend to continue to trade
- you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus
The fourth grant will provide a taxable grant calculated at 80% of 3 months’ average trading profits. The fourth grant will be paid out in a single instalment and capped at £7,500 in total.
How to claim
To allow HMRC to process recently submitted 2019 to 2020 Self Assessment tax returns, the online claims service for the fourth grant will be available from late April 2021 until 31 May 2021. If you are eligible, HMRC will contact you in mid-April to give you your personal claim date. This will be the date that you can make your claim from. There will be more guidance about the fourth grant in due course.
The UK government has also announced that there will be a fifth and final grant covering May to September. You will be able to claim from late July if you are eligible for the fifth grant. The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.
The fifth grant will be worth:
- 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more
- 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%
Further details will be provided on the fifth grant in due course.
HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits. You can no longer simply claim you have increased costs (i.e. masks) to justify a claim.
If you are in doubt as to whether you should make a claim please speak to us for help. If you do make a claim then supporting records are essential (see further below). We cannot as agents do the claim for you.
Further guidance on the terms used and records that must be kept.
What is meant by reduced activity, capacity or demand?
The qualifying criteria for the third grant are stricter than for the first and second round of grants, in that they require the trade to not just be adversely affected by COVID-19, but specifically be suffering from 'reduced activity, capacity or demand'.
HMRC's guidance breaks this requirement into two separate circumstances, indicating that this condition can be met if you:
- are currently trading but impacted by reduced demand due to COVID-19; or
- have been trading, but are temporarily unable to do so due to COVID-19.
In both cases, you must also intend to continue to trade, and reasonably believe that the reduced demand or temporary inability to trade will result in a significant reduction in your trading profits for the basis period in which the period 1 November 2020 to 29 January 2021 falls (see below).
HMRC indicate that you may be impacted by reduced demand if, for example, you:
- have fewer customers or clients than you would normally expect due to social distancing or other government restrictions;
- have one or more contracts cancelled and not replaced; or
- carry out less work due to supply chain disruptions.
The guidance makes it clear that increased costs alone (for example from having to buy PPE or cleaning supplies) will not qualify as reduced demand. You will therefore not be eligible for the third grant if this is the only impact on your business.
HMRC indicate that you may qualify due to temporary inability to trade if, for example:
- your business has had to close due to government restrictions;
- you've been instructed to shield or self-isolate and can't work from home (with the exception of self-isolating as you have returned to the UK from abroad, which does not count);
- you've tested positive for COVID-19; or
- you cannot work due to having parental caring responsibilities (e.g. because schools or childcare facilities have closed).
HMRC's guidance sets out some examples of when they believe these conditions may, and may not, be met.
What is meant by 'reasonable belief' that there will be a 'significant reduction in trading profits'?
In order to claim the third grant, you must reasonably believe that the reduced activity, capacity or demand due to COVID-19 will result in a significant reduction in trading profits for your basis period (or periods) which includes the period 1 November 2020 to 29 January 2021.
Note that this test is forward looking, and requires the position across the whole basis period (and not just the period from 1 November 2020 to 29 January 2021) to be considered. For example, a business with a 31 March year end will need to consider whether the qualifying reduction in activity, capacity or demand will significantly reduce trading profits for the year ending 31 March 2021 overall.
HMRC have not published any detailed guidance setting out their interpretation of 'reasonable belief' or 'significant reduction'. Instead, they indicate that you need to make an honest assessment, and that this decision cannot be made for you by HMRC as it requires individual and wider business circumstances to be considered.
Given the forward looking nature of this test, HMRC advise that you should wait until you have reasonable belief that trading profits will be significantly reduced before making your claim for the third grant. However, it should be remembered that the deadline for claims is 29 January 2021.
HMRC's guidance does set out some basic examples of when they believe this condition may, and may not, be met.
Records you need to keep
You must keep a copy of all records in line with normal self-employment record keeping requirements, including the:
- amount claimed
- grant claim reference
If you’re currently trading but have reduced demand
You must keep any evidence that your business has had reduced activity, capacity or demand due to coronavirus at the time you made your claim, such as:
- business accounts showing reduction in activity compared to previous years
- records of reduced or cancelled contracts or appointments
- fewer invoices
- a record of dates where you had reduced demand or capacity due to government restrictions
If your business is temporarily unable to trade
You must keep evidence if your business has been unable to trade due to coronavirus, such as:
- a record of dates where you had to close due to government restrictions
- NHS Test and Trace communications - if you’ve been instructed to self-isolate in-line with NHS guidelines and are unable to work from home (if you’ve been abroad and have to self-isolate, this does not count)
- a letter or email from the NHS asking you to shield
- test results if you’ve been diagnosed with coronavirus
- letters or emails from your child’s school if you have had parental caring responsibilities