Self-employed taxpayers can now apply for the fifth SEISS grant, but they may need to provide two different turnover figures from their business as part of their application.
The portal to apply for the fifth self-employed income support scheme (SEISS) grant opened on 29 July, but not everyone can apply at once.
HMRC has contacted every self-employed taxpayer (by email or letter) who it believes may be eligible to apply for the fifth and last SEISS grant, giving them a personal start date from which they can apply. Taxpayers should not attempt to apply before their personal start date as their claim will not be processed.
This staggered start is to prevent every eligible taxpayer applying on the same day and crashing the system, and to give HMRC time to process all the grant payments due.
Taxpayers don’t have to apply for the SEISS grant on the first possible day, as the portal will remain open until 30 September 2021, but the sooner they apply, the quicker the money will arrive.
Who is eligible?
HMRC has checked basic eligibility of taxpayers in advance of opening the claims portal for them, such as whether the 2019/20 tax return was submitted by 2 March 2021.
The taxpayer must make a declaration in the application that they intend to keep trading in 2021/22. Also, that their trade profits will suffer a ‘significant reduction’ due to the impact of covid-19 in the period between 1 May 2021 and 30 September 2021.
There is no definition of “significant reduction” and HMRC is not planning to provide one. However, the taxpayer is only required to look forward to estimate their profits in the period ending 30 September 2021. They are not required to re-examine their claim with hindsight after the event.
As long as they keep all evidence of why they believed profits have reduced (ignoring any covid-related grants received), they will be able to show that their reasonable belief at the time of application was that profits would be reduced.
If the taxpayer was eligible for the SEISS-4 grant (or earlier grants), but failed to apply on time they can still apply for the SEISS-5 grant, if they meet the other conditions.
To complete the grant application the most taxpayers need to submit two different turnover figures. HMRC has improved its guidance and tweaked the law set out in the HMRC Direction slightly in respect of partnerships.
New traders, who started trading in 2019/20 and didn’t have a (different) self-employed trade in any of the years 2016/17 to 2018/19, don’t need to provide a turnover figure at all, as HMRC already has a figure for 2019/20 from their tax return. These new traders will get the 80% level of the grant.
Most taxpayers will need some help from their accountant to find the required turnover figures. HMRC has created a YouTube video for tax agents to show what clients will see during the SEISS-5 grant application process, and what other information the taxpayer will need to apply.
Tax agents should not attempt to complete the SEISS grant application on behalf of clients. If a tax agent uses their client’s government gateway’s ID and password to apply for the SEISS grant this will likely result in the application being blocked.
Finding the figures
The turnover figure is gross sales for all concurrent trades, not profit. It should exclude all Covid-related grants received: SEISS, CJRS, business rates support, and ‘eat out to help out’. These figures are only used to determine which level of grant the taxpayer qualifies for (30% or 80% of average monthly profits), they do not feed into the actual calculation of the grant to be paid.
The two turnover figures required are:
- Pandemic period
This will be approximately the same for everyone. Irrespective of the date the accounts are drawn-up to the taxpayer must report their turnover for the 12 months ending between 31 March and 5 April 2021, eg 12 months from 1 April 2020 to 31 March 2021
This is the turnover for the accounts reported on the 2019/20 tax return or the 2018/19 return if 2019/20 was unusual. Unless the taxpayer uses an accounting period ending between 31 March and 5 April, it will not cover the same months as correspond to the turnover reported for the pandemic period.
Jane draws up accounts for her self-employed business to 30 September each year. She will report turnover for the following periods as part of her application for SEISS-5 grant:
- Pandemic: 1 April 2020 to 31 March 2021, excluding SEISS grants 1, 2 and 3 received in that year.
- Reference: 1 October 2018 to 30 September 2019, as reported on her 2019/20 tax return.
It is the partnership turnover as a whole that HMRC wants to compare for the pandemic to reference period, which is why a partner is required to report the turnover for the whole partnership business.
Only where the individual partner also has another concurrent self-employed business (sole-trader or another partnership) in 2019/20 should he report just his share of the partnership turnover.
What will the taxpayer get?
If the comparison of figures from reference period to pandemic period shows that turnover has decreased by 30% or more, HMRC will calculate the SEISS grant based on 80% of the taxpayer’s average monthly profits for three months capped at £7,500.
If the turnover between the reference and pandemic periods has decreased by less than 30%, the taxpayer will get a SEISS grant calculated at 30% of average monthly profits for three months capped at £2,850.
Where turnover has not fallen at all no SEISS grant is payable. It is thus important to enter the correct turnover figures relating to the pandemic period and reference period in the right places in the application (see HMRC YouTube video).