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.
Details of the Scheme
The scheme allows individuals to claim a taxable grant worth 80% of their average monthly trading profits up to a maximum of £2,500 a month. Initially this scheme was only available for three months (and therefore capped at £7,500) but it was announced at the end of May that it would be extended for a further three month period. Details of the second phase of claims can be found below.
The grant will be subject to Income Tax and National Insurance contributions but does not need to be repaid.
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 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.
Second Phase Claims
On 29 May 2020, the Chancellor Rishi Sunak announced an extension to the SEISS. This second grant would be the final grant to be given under this scheme.
This second grant allows individuals to claim a taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profit, capped at £6,570 in total. This represents a reduction from the first grant that enabled claimants to receive up to 80% of their average monthly trading profits, capped at £7,500.
The eligibility criteria remains the same for the second grant as were in place for the first and is outlined below.
An individual does not need to have claimed the first grant in order to be eligible for the second and final grant.
Who can claim
Self-employed individuals or a member of a partnership can claim, and they must:
- carry on a trade which has been adversely affected by coronavirus;
- traded in the tax year 2018 to 2019 and submitted their self-assessment tax return on or before 23 April 2020 for that year;
- traded in the tax year 2019 to 2020; and
- intend to continue to trade in the tax year 2020 to 2021.
To work out eligibility HMRC will first look at claimants 2018 to 2019 self-assessment tax return. Trading profits must also be no more than £50,000 and at least equal to non-trading income.
If you are not eligible based on the 2018 to 2019 self-assessment tax return, HMRC will look at the tax years 2016 to 2017, 2017 to 2018 and 2018 to 2019.
There is extensive guidance provided by HMRC as to how they will work out the total income and trading profits for the SEISS. You can find out more about this on gov.uk
Grants under the SEISS are not counted as ‘access to public funds’, and you can claim the grant on all categories of work visa.
Duncan & Toplis cannot make the claim for claimants, however, we can provide help and support to make the claim. HMRC have provided guidance on various scenarios of circumstances that may impact on your eligibility.
Am I eligible?
You can apply if you’re a self-employed individual or a member of a partnership and you:
- Have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19.
- Traded in the tax year 2019-20.
- Are trading when you apply or would be except for COVID-19.
- Intend to continue to trade in the tax year 2020-21.
- Have lost trading/partnership trading profits due to COVID-19.
- Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment.
This is determined by at least one of the following conditions being true:
- Having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
- Having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period.
- If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.
Duncan & Toplis can use this tool to check your eligibility. Claimants will need:
- Self Assessment Unique Taxpayer Reference (UTR) number
- National Insurance number.
If eligible, HMRC will inform you of the date that you will be able to make a claim from and ask you to add your contact details. If not eligible, claimants can ask HMRC to review this.
How much can be claimed
Claimants will get a taxable grant based on their average trading profit over the three tax years:
- 2016 to 2017
- 2017 to 2018
- 2018 to 2019
To work out the average trading profit HMRC will add together claimants total trading profits or losses for the three tax years then divide by three.
The grant will be 80% of claimants average monthly trading profits, paid out in a single instalment covering 3 months, and capped at £7,500 altogether. The online service will tell claimants how we’ve worked the grant out.
The grant amount HMRC work out for claimants will be paid directly into their bank account, in one instalment.
For farming and creative artist claimants the calculation of trading profits is before any claim for averaging relief.
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.
How to claim
HMRC have begun contacting individuals they think are eligible to invite them to claim using the GOV.UK online service. Payment will be made by early June 2020 if your claim is approved.
When making a claim, you will need:
- Self Assessment UTR
- National Insurance number
- Government Gateway user ID and password – if claimants do not have a user ID, this can be created when claimants check their eligibility online
- bank account number and sort code claimants want HMRC to pay the grant into (only provide bank account details where a Bacs payment can be accepted)
Claimants will have to confirm to HMRC that your business has been adversely affected by coronavirus. If you claim the grant HMRC will treat this as confirmation that you are below the state aid limits. Applications for the first grant will close on 13 July 2020 and applications for the second grant will be opening 17 August 2020.
HMRC will check claims and take appropriate action to withhold or recover payments found to be dishonest or inaccurate.
You will be told straight away if the grant is approved. The grant will be paid into your bank account within six working days.
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.
Please note, the information above is correct as of Thursday 05 August 2020 but may be subject to change and some elements of business support are devolved and therefore support may differ in Scotland, Northern Ireland and Wales.
For the latest guidance and professional advice, please contact us or speak to your dedicated Duncan & Toplis adviser.