Support for self-employed
3rd Self Employed Income Support Grant
The third self-employed grant will be available to claim from 30 November 2020 until 29 January 2021, and must be claimed via the portal as before. It will be at 80% of average profits, with the same eligibility as before, so newer businesses or those who had half their income from other sources may still be excluded.
The conditions have changed and are stricter, it is important you read the conditions.
Just because you enter your details and it shows eligibility and a grant amount does not automatically mean you can make a valid claim.
We have already seen checks issued on clients who have made claims on the 1st and 2nd grants, and indeed some grants repaid. We are informed that a new unit has been set up to check claims, and clients whose 20/21 profits (including grants) are not lower than average may well receive checks, although it is possible that overall profits could be higher and the grants fairly claimed.
To be able to claim for the third grant, you must either
- be currently trading but are impacted by reduced demand due to coronavirus
- have been trading but are temporarily unable to do so due to coronavirus
You must also:
- intend to continue to trade
- reasonably believe there will be a significant reduction in your trading profits due to reduced demand or your inability to trade
You must also meet all other eligibility criteria to make a claim.
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