Self-employment Income Support Scheme (SEISS)
On the 26 March the Government announced a support package for the self-employed, including members of partnerships in the UK that have lost income due to coronavirus.
Initially, this scheme was only available for three months to cover the period from March to May 2020. However, it was announced at the end of May that it would be extended for a further three-month period as part of a second phase of grants.
The scheme was then extended further for another six months in the form of two grants covering the three-month periods from November 2020 to January 2021 and February to April 2021. Payments were due to be made more quickly, with the application window for the first of these grants being brought forward from 14 December to 30 November.
The scheme allows individuals to claim a taxable grant worth 80%, up to a maximum of £7,500, for the third claim period of November 2020 to January 2021.
Following the Budget Statement, the scheme has been extended once again, with a further two grants covering until 30 September 2021.
The fourth payment will cover the period from February until the end of April, worth up to 80% of trading profits, averaged over three months up to £7,500 in total. HMRC have stated that the service to claim the fourth grant will be available from late April 2021.
If you are eligible, based on your tax returns, HMRC will contact you in mid-April to give you a date that you can make your claim from. The contact will either be by email, letter or within the online service.
Claimants will need to confirm that they meet all the eligibility criteria when making their claim and will need to be made on or before 1 June 2021.
The fifth grant will cover May to late September, the amount will be dependent upon the loss of income. Workers whose turnover has fallen by at least 30% can continue to claim for up to 80% of profits, £7,500 in total. Those whose income has fallen by less than 30%, can still apply for up to 30% of trading profits, averaged over three months and claims can be made from July.
The grant should be recorded as part of claimants’ self-employment income, and it may affect the amount of Universal Credit claimants receive. This will not affect Universal Credit claims for earlier periods.
If claimants receive the grant they can continue to work or take on other employment including voluntary work or duties as an armed forces reservist.
If claimants have other employment as a director or employee paid through PAYE their employer may be able to get support using the Coronavirus Job Retention Scheme.
The government have now announced that parents whose trading profits dipped in 2018/19 because they took time out to have children will be able to claim for a payment under this scheme.
Eligible parents include those who took time out of trading to care for their children within the first 12 months of birth of the child or within 12 months of an adoption placement.
They will now be able to use either their 2017/18 or 2016/2017 and 2017/2018 self-assessment tax returns as the basis for their eligibility.
Am I eligible?
To be eligible for the third grant you must be a self-employed individual or a member of a partnership. If you claim Maternity Allowance this will not affect your eligibility.
You must have traded in both tax years:
- 2018 to 2019 (and submitted your Self Assessment tax return on or before 23 April 2020 for that year)
- 2019 to 2020
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 declare that:
- you intend to continue to trade
- you reasonably believe there will be a significant reduction in your trading profits
Guidance on ‘reasonable belief’ and ‘significant reduction’ can be found on the government’s website.
How to claim
You must make the claim yourself. You must not ask a tax agent or adviser to claim on your behalf as this will trigger a fraud alert, which will delay your payment.
You will need your:
- Self Assessment Unique Taxpayer Reference (UTR) – if you do not have this find out how to get your lost UTR
- National Insurance number – if you do not have this find out how to get your lost National Insurance number
- Government Gateway user ID and password – if you do not have a user ID, or have lost it, you can create one or find out how to recover your login details when you make your claim
- UK bank details (only provide bank account details where a Bacs payment can be accepted) including:
- bank account number
- sort code
- name on the account
- your address linked to your bank account
For the third round of grant funding, covering the period November 2020 to January 2021, you must make your claim between 30 November 2020 and 29 January 2021.
Loan charge cases
For the purposes of SEISS, a person is subject to the loan charge if:
(a) on 26 March 2020 the person is chargeable to income tax on any amount by reason of Schedule 11 or 12 to the Finance (No. 2) Act 2017 (loan charge) as enacted as at that date, or
(b) the person would be so chargeable but for entering into a contract settlement on or after 20 December 2019.
Contract settlements and amendments to tax returns
For the purposes of SEISS, amounts of trading profits and relevant income are determined by reference to a person’s tax returns as at 23 April 2020 but no account will be taken of any amendment made to a tax return on or after 6pm on 26 March 2020 or any contract settlement.
If claimants have not submitted Self Assessment tax returns for all three years
HMRC will work out their average trading profit based on continuous periods of self-employment, which will be either:
- the tax years 2017 to 2018 and 2018 to 2019
- the tax year 2018 to 2019 only, even if they were self-employed in the tax year 2016 to 2017.
Tax treatment of government grants
SEISS grants that were correctly paid are to be taxable on receipt in 2020/21, irrespective of the business accounting date and with no allocation of any part of the grant to March 2020.
- All coronavirus government support grants are to be included in accounts as taxable income.
- Claimants should be aware of this and budget for potential income tax and national insurance bills.
Reporting errors to HMRC and penalties
HMRC has updated its guidance on telling them about an ineligible receipt of grant or an over payment under the SEISS. The update covers when HMRC must be told and the grant is to be repaid. Details can be found here.
Guidance on the penalties due if HMRC are not told about ineligible receipts or over payments under the SEISS has now been published.
Details of how HMRC decides how much the penalty will be, when you may have to pay a penalty and how to appeal against a penalty can be found here.
For the latest guidance and professional advice, please contact us or speak to your dedicated Duncan & Toplis adviser.