Coronavirus: Self Employed Income Support Scheme – Round 2…
While the first round of Self Employed Income Support Scheme (SEISS) grants is running to a close in the coming weeks, the scheme has been extended with a second (and final) round of grants scheduled to be made available in August.
This second round of grants is separate to the first round. While its operation will be similar to the first round there are some differences.
Both Grants
The amount of grant due depends on ascertaining “average profits” for the taxpayer over the last few tax years. There are quirks in certain scenarios in terms of how HMRC calculate this.
While the taxpayer must apply for the grant via HMRC’s online portal, the calculation of entitlement is done by HMRC.
While HMRC tend to prompt taxpayers that they think are eligible, the taxpayer must then make the application themselves. Unfortunately, because of the speed at which this service has been made available, HMRC have not added the facility for agents to apply on a client’s behalf.
Applications for the two grants are completely separate. A taxpayer might apply for just one, both, or neither.
SEISS Grants are taxable income. They should be included in the trading accounts for the period that they relate to.
To get an estimate of entitlement, please refer to our calculator:
Also, there are tests which must be passed to be eligible. These include:
– Trading profit must both be below £50,000, yet be above 50% of total taxable income (see our earlier blog for more detail on how this works)
– 2018/19 Tax Return must already be submitted to HMRC.
– Trade must be ongoing through 2019/20 and at present into 2020/21
. . . and perhaps most importantly
– Claimants need to confirm their business has been ‘adversely affected’ by Covid-19. More information on this below.
First Grant
The deadline for latest application for the first round of grants closes on 13 July.
The grant pays 80% of three-months-worth of “average profits”, with a cap on the grant of £7,500.
Business must have been adversely affected by Coronavirus on or before 13 July.
Start a claim by checking eligibility : www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference
Second Grant
Its expected applications will open in August, however precise opening and closing dates are not yet available.
The grant pays 70% of three-months-worth of “average profits”, with a cap on the grant of £6,570.
Business must have been adversely affected by Coronavirus on or after 14 July.
Claim portal: expected to be at the same address, but not yet confirmed.
Adversely Affected
While HMRC have provided some examples of what does constitute being adversely affected there has been no precise definition of this term.
This can present difficulties for the claimant as while some scenarios will be clear cut, others might not be. Additionally, the guidance does not state to what degree a business needs to have been adversely affected, So it would appear that even small but definite negative impacts arising from Covid-19 are enough to qualify.
There is no link between the extent to which a business has been affected and the amount of the grant payable, it is an all-or-nothing qualification.
Not all businesses with falling profits will have been adversely affected, and conversely a business may be adversely affected but still have rising profits. Therefore it does not seem possible that HMRC can seek to assess if a business has been adversely affected purely in terms of that businesses accounting figures for the periods in question.
However, it is impossible to be sure that HMRC will not seek to somehow retrospectively assess that all claimants were properly eligible, at some point in the future.
In all cases, we strongly recommend that the claimant documents the rationale as to why they believe their business has been adversely affected, and keeps copies of all relevant supporting information.
HMRC gives examples of a business being adversely affected as including:
– The business owners are unable to work because they are shielding / self-isolating / on sick leave because of coronavirus / have caring responsibilities because of coronavirus.
– The business has paused trading, or has been scaled back, due to things like supply chain interruption / fewer customers / staff were unable to work.
There are many different scenarios relating to Covid-19 that are affecting businesses and HMRC’s examples cover relatively few of them. For example, while not mentioned by HMRC, it is quite common that a business suffers noticeably increased costs due to coronavirus which would make a robust argument that it had been adversely affected.
It is possible that a taxpayer could be adversely affected for one grant but not for the other, as some HMRC examples illustrate. SEISS claimants should consider whether they have been adversely affected in the relevant period for the grant that they are claiming.
Some have speculated that HMRC may publish more guidance in terms of what does and does not constitute ‘adversely affected’ before the second round of applications opens, and therefore this blog should be considered subject to updates after the date of publishing on 26 June 2020.