Self-Employed Income Support Scheme - Grant 5
The rules have now been released covering eligibility for the 5th and final instalment of the coronavirus support programme for the self-employed, known as SEISS. The rules for this one are significantly different from the previous instalments, so we'll cover the similarities with grant 4 first then go into more detail on the specific rules for grant 5.
WHO CAN CLAIM
Other than the final bullet point below, the initial eligibility tests are largely the same as for grant 4, which we covered in an earlier article HERE. To summarise again:
- You need to be a sole trader or partner in a partnership which traded in both tax years 2019/20 and 2020/21
- You need to have submitted your personal income tax return for 2019/20 by 2 March 2021
- Your trading profits as per your tax return for 2019/20, OR an average of tax years 2016/17 to 2019/20, must be no more than £50,000 AND must be no more than the total of your non-trading income for the same period(s)
- You must intend to keep trading as a sole trader or in the partnership in 2021/22 (i.e. you have no current plans to cease trading, sell the business, or convert the business into a limited company)
- You must reasonably believe that the impact of COVID-19 between 1 May 2021 and 30 September 2021 will cause a significant reduction in your trading profits for the tax year that you report them in
HMRC have said they will contact all taxpayers they believe to be eligible in mid-July. They will base this assessment on your filed tax returns. They will contact you by email, text message, letter or within the online service.
There are certain special circumstances listed HERE which might allow a claim which doesn't meet the above conditions, or where certain matters affected profits in the periods. If you believe your circumstances fit any of these categories please let us know and we will look into this with you.
This is where grant 5 deviates from grants 1 to 4, as there is an additional test to satisfy to determine whether a claim is valid, and what % of your average profits you will receive by way of the grant.
If you traded in tax year 2018/19 and earlier, you will need two turnover figures. If you started trading in tax year 2019/20 you don't need to provide any.
The definition of turnover for this purpose is given as "Turnover includes the takings, fees, sales or money earned or received by your business". This will normally correspond to the sales figure in your accounts, and if you are VAT registered this should EXCLUDE the VAT element (for Flat Rate VAT businesses the VAT element is the amount declared on your VAT returns, i.e. at the flat rate). Note also that turnover does NOT include any grant income, including SEISS, CJRS, Eat Out to Help Out, and local authority grants.
For those who are required to supply turnover figures the periods to be used and compared are as follows:
- 2020/21 - this should be a 12 month period starting between 1 and 6 April 2020; therefore the period must end by 5 April 2021. Note that this period will only correspond to your usual accounting year if that ends between 31 March and 5 April, so you may need to run different reports (if you use software for your books) to collate this information.
- 2019/20 - in most cases this will be the turnover figure reported on your 2019/20 tax return, which will usually be your normal accounting period that ended between 6 April 2019 and 5 April 2020. There should therefore be no overlap with the data used to compile the 2020/21 turnover figure. Note that if 2019/20 wasn't a 'normal' year for your business then under certain circumstances you may use the 2018/19 figure instead.
There are a number of special cases here for both figures, including what to do if you have more than one trade, how do you obtain a figure for partners in a partnership, if you ceased or started trading, etc. Contact us if your circumstances weren't straightforward or if you have any questions.
However your figures are compiled, it is vitally important that you keep a record. Please retain your workings as these may be requested by HMRC in the coming years if they choose to retrospectively check your claim(s).
HOW MUCH CAN I CLAIM?
If you were required to supply turnover figures the amount you can claim will depend on both average profits and changes in turnover.
Firstly, compare the turnover figures from steps 1 and 2 above. If the figure from 2020/21 is less than the figure for 2019/20 you may make a claim. If your turnover did not fall then you will not be able to make a claim.
The value of the claim depends on the average profits worked out at the start of the process and the amount by which your turnover has fallen. Note that despite this grant being connected to a 5 month period it is still based on 3 months' worth of profits, in common with the earlier SEISS grants.
If your turnover fell by 30% or more then your grant will be 80% of those profits (grant capped at £7,500), but if turnover fell by less than 30% then your grant will be 30% of those profits (grant capped at £2,850).
So if your 2019/20 profit was £24,000 and your turnover fell by 35% then the grant is based on 3/12 of £24,000 x 80% = £4,800. If your turnover had only fallen by 20% your grant would be 3/12 of £24,000 x 30% = £1,800.
Similarly if your 2019/20 profit was £40,000 and your turnover fell by 35% then the grant is based on 3/12 of £40,000 x 80%, which would be £8,000 but the cap kicks in so you would receive the maximum £7,500. If your turnover had only fallen by 20% your grant would be 3/12 of £40,000 x 30%, which would be £3,000 but the cap kicks in so you would receive £2,850 instead.
If you didn't have to provide turnover figures, e.g. if you started trading in 2019/20, then your grant will be at the 80% of average profits level.
WHEN CAN I CLAIM, AND HOW?
HMRC are due to open the claim system at the end of July and it will remain open until 30 September 2021. The initial communication from them in mid-July will indicate when your personal claim window opens.
The claim method will be the same as for the previous SEISS grants, i.e. via your own HMRC online account. Please be aware that scammers will be active as they are aware of the scheme and the claim processes and deadlines and will be trying to use this to obtain access to funds and/or personal details. Only claim through your own online HMRC account and do not follow any suspicious links in emails or texts.
As ever, if you have any questions on this please let us know.