HMRC have now issued guidance for the Self-Employment Income Support Scheme fifth grant (SEISS).
As predicted, the grant will be determined by a turnover test that compares the self-employed income in the 2021 tax year compared to pre-coronavirus trading. The 2021 Self-Assessment tax return does not need to have been completed, but tax payers must have records to support the claim being made and the calculation used.
There are 2 levels of grant that will be paid out depending on the calculation results:
- If the businesses turnover (excluding any SEISS grants already claimed) has reduced by 30% or more, they will receive a grant worth 80% of 3 months average trading profit capped at £7,500.
- If the businesses turnover (excluding any SEISS grants already claimed) has reduced by less than 30%, they will receive a grant worth 30% of 3 months average trading profit capped at £2,850.
The eligibility criteria for the grant is as follows:
- Must have submitted a 2020 tax return on or before 2 March 2021
- Trading profits no more than £50,000 and at least equal to their non-trading income, based on their 2020 tax return or an average of relevant tax years between 2016-17 and 2019-20
- The Self Employed individual must declare that they intend to continue to trade and are either currently trading but are impacted by reduced activity, capacity or demand due to coronavirus or have traded previously but are temporarily unable to do so due to coronavirus
- If the only reason a customer is temporarily unable to trade is because they have to quarantine or self-isolate after going abroad, this does not meet the criteria.
- Have a reasonable belief that there will be a significant reduction in their trading profits between May and September 2021 due to reduced business activity, capacity, demand or inability to trade due to coronavirus.
- If HMRC have previously advised that they were not eligible for the 4th Grant, they will not be eligible for the 5th grant either.
As with previous claims Advisors such as Accountants are not able to make the claim on their clients behalf, however they are able to assist in respect of checking the turnover criteria and eligibility status.
Warning for Tax Payers that have received SEISS grants:
HMRC have already identified that the SEISS grants are not being reported correctly on self-assessment tax returns. They have announced that from 19 June, any tax returns that are completed incorrectly will be automatically amended by HMRC and a notice will be issued to the taxpayer advising of the amendment needed.
The SEISS grants are taxable income and many tax payers may get caught out as the appropriate level of tax and national insurance has not been put aside to pay the liabilities that will become due for payment by the end of 31 January 2022. This particularly affects contractors that may have previously received refunds as tax was deducted through the CIS system. These individuals in particular will now have a tax bill due for payment as the tax deducted under CIS has reduced significantly and this means that there are potentially payments on account to make in the 2022 tax year.
Self-employed individuals that may have amended earlier years tax returns will also need to consider if this will have impacted on the amount of SEISS grant already received and if a notification of an overpayment needs to be made to HMRC.
Where the SEISS grant was claimed incorrectly the tax payer has the opportunity to amend this on their self-assessment tax return and the relevant overpayment will then be due back to HMRC.
There are lots of opportunities for errors to occur and advice should be obtained from your Accountant if you are concerned. At Lambert Chapman, we have staff that are able to help with self-assessment tax returns and SEISS grants.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.