In the Chancellors Budget on 3 March 2021, the UK government announced that the Self-Employment Income Support Scheme (SEISS) was being extended to provide a fourth and fifth grant under the scheme. These additional self-employed government grants would take account of 2019/20 tax returns submitted by 2 March 2021.
It’s important that the self-employed, sole traders and partnerships understand what is on offer and how they can claim. This blog will answer all your questions about the grants.
What is the Self-Employment Income Support Scheme (SEISS)?
The grant was offered as a response to the Coronavirus outbreak in 2020. It is designed to offer self-employed Sole Traders, and members of partnerships affected by coronavirus, a taxable grant of 80% of their monthly wages up to a max of £2,500 a month, for three months (capped at £7,500).
Limited companies and trusts are not entitled to claim under this scheme.
There have been three rounds of the grants offered and the fourth and fifth grants under the scheme are due to be released soon for people to claim.
The best way to describe the government’s Self-employment Income Support Scheme (SEISS) is that the grant covers self-employed people, much like the Coronavirus Job Retention Scheme (CJRS) for employed people.
These self-employed government grants are subject to Income Tax and National Insurance contributions, but as it’s a grant, it will not need to be repaid.
Who is eligible for the grant?
To claim the grant you must hit HMRCs new criteria. The Self-Employment Income Support Scheme (SEISS) fourth grant will be open to many more people who were previously excluded. In addition, there will be a fifth grant too open later this year.
With fourth and fifth grants now added, it is getting more confusing around who can claim for the grant. If you are eligible, the fourth and fifth grants, these can be claimed even if previous grants were not claimed.
For the first three self-employment grants under the scheme, HMRC didn’t take account of a taxpayer’s sole trader profits, or share of partnership profits, from 2019/20 in calculating the grant.
However, for the fourth grant, that covers the period February 2021 to April 2021, HMRC are now able to take account of profit figures on 2019/20 tax returns. However, the 2019/20 tax return must have been submitted by midnight at the end of 2 March 2021. If you had not submitted your tax return by this date, you will not be eligible to claim under the fourth grant.
This means that individuals who started self-employment for the first time in 2019/20, as a sole trader or partner in a partnership, might now be eligible to claim the fourth and fifth grants.
However, for existing claimants, the inclusion of 2019/20 profit figures might mean you receive a different amount from what they are expecting. Some people may no longer qualify at all for the fourth and fifth grants.
For those eligible for the first three grants, if you have not yet claimed for these grants in the first three rounds, the closing date was 29 January, so you can no longer claim.
Fourth grant eligibility criteria
To work out your eligibility for the grant HMRC will look at your 2019 to 2020 self-assessment tax return. To claim a grant, your trading profits must be no more than £50,000 and at least equal to your non-trading income.
If you’re not eligible to make a claim based on your 2019/20 self-assessment tax return, HMRC will then look at the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020.
To make a claim, you must also have traded in both tax years:
- 2019 to 2020 and submitted your tax return by 2 March 2021.
- 2020 to 2021
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 coronavirus1
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
To make a claim, you must also have had at least half of your income from self-employment in 2019/20. It doesn’t matter when in 2019/20 you started self-employment. But, if you moved from being employed to being self-employed in 2019/20, you wouldn’t qualify if your income from employment exceeded your self-employment profits for the year.
What can I claim for the fourth self-employed grant?
The fourth grant will provide a taxable grant calculated at 80% of 3 months’ average trading profits.
For example: If you started self-employment for the first time in 2019/20, then your trading profits will be divided by 12 (irrespective of when you started trading) and then multiplied by 3 and then 80%.
The fourth grant will be paid out in a single instalment and capped at £7,500 in total.
Note: The amount of grant may be less than you expect if your started trading part the way through the year because your profits are divided by 12 and not the number of months you had traded.
The grant will be liable to tax and Class 4 National Insurance contributions in the tax year in which it is received.
How to claim the fourth government grant?
HMRC are still processing the 2019/20 Self Assessment tax returns, so the fourth grant will be available from late April 2021 until 31 May 2021.
There is no need for you to contact HMRC at this point. 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.
As we get nearer to the release date of the grants, more guidance about the fourth grant will be available.
There is much worry about how HMRC will be contacting people. Many HMRC scams are phone calls and HMRC do not normally phone taxpayers directly. However, for this self-employed grant HMRC are changing the contact process, so you must be aware of this. Letters will be sent mid-April and explain that HMRC will contact you within 10 working days using the phone number you provided on your 2019/20 Self Assessment tax return. We believe the calls from HMRC will be from an ‘unknown number’ and HMRC will only try to contact you three times. There is information contained in the letter about what you should do if you have changed phone number or did not provide one on your 2019/20 tax return.
It’s difficult to know if letters from HMRC are genuine and not a scam. You can check a list of genuine HMRC contacts online or you may wish contact HMRC yourself and check with them before providing any personal information online.
What if I’m not contacted by HMRC about the fourth grant?
If for any reason, you are not contacted you may still be able to make a claim for the fourth grant provided you meet the eligibility criteria.
How to claim the self-employed grant?
Once, you’ve been contacted by HMRC, you’ll be asked to provide certain documents to prove your identity as follows:
- Self Assessment Unique Taxpayer Reference (UTR)
- National Insurance number
- Government Gateway user ID and password
- UK bank details including account number, sort code, name on the account and address linked to the account
Our understanding is that you will need to provide these documents using Dropbox (a secure online sharing service) within 2 days after receiving the Dropbox link. If you will struggle to do this, you need to discuss this with HMRC in the initial phone call.
If you miss HMRCs initial calls then they will write to you once more.
Note: If you have changed address since you submitted your 2019/20 tax return, you should contact them as soon as possible and notify them of your change of address. You can use your Personal Tax Account to inform HMRC of a change of address.
I’ve claimed for the previous government grants, so will these changes affect me?
Even though these new grants are targeted at the newly self-employed, the inclusion of 2019/20 profits in the calculation will affect existing claimants as well. So, if you have claimed one or more of the first three SEISS grants, the amount of the fourth grant might be more or less than what you previously received.
I didn’t submit my tax return by 2 March 2021, am I not eligible?
Our understanding and the governments criteria are clear that if you did not submit your 20/21 tax return by 2 March 2021, you will not be eligible for the fourth or fifth grants, even if you were eligible for previous grants based on prior year returns.
How to claim the self-employment fifth grant?
The UK government has also announced that there will be a fifth and final grant covering May 2021 to September 2021.The online claims service for the fifth grant will open in late July 2021. You will be able to claim from this date if you are eligible for the fifth grant.
How much is the fifth government 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:
- 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%
What to do next?
For now, the self-employed need to wait to see if they receive a letter from HMRC, until then we don’t recommend you take any action. Only contact HMRC if you need to do things like change of address or need their help to pull your information together.
If you need any further clarity or just want to talk through the SEISS grant scheme, then please contact us.
Any questions? Schedule a call with one of our experts.