If you are self-employed or a member of a partnership that has had a downturn in trade because of coronavirus, you may be eligible in the fourth round of grant funding through the Self-Employment Income Support Scheme (SEISS).
The Government has published guidance on the fourth SEISS grant which covers from 1 February 2021 to 30 April 2021. The fourth grant will take into account 2019 to 2020 tax returns and includes those who became self-employed in tax year 2019 to 2020. The rest of the eligibility criteria remain unchanged from the earlier grant schemes.
Who Can Apply?
You must be a self-employed individual or a member of a partnership. You cannot claim the grant if you trade through a limited company or a trust. You must have traded in tax years 2019/2020 and 2020/2021 and submitted a tax return on or before 2 March 2021
You must either:
- be currently trading but have seen a downturn due to coronavirus
- have been trading but are currently unable to do so due to coronavirus
You must also declare that you:
- intend to continue to trade
- reasonably believe there will be a significant reduction in your trading profits
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How Much Is Available?
The fourth grant is calculated at 80% of three months’ average trading profits. It will be paid out in a single instalment and capped at £7,500 in total (£2,500 a month). How much you receive will depend on your average trading profits.
HMRC calculates average trading profits using up to four years’ of submitted tax returns if they’re available. In brief, HMRC works out how much you get like this:
The fourth grant will be based on your tax returns from four tax years – 2016/17, 2017/18, 2018/19 2019/20 – if you submitted them. HMRC will work out your average monthly trading profit based on these four tax years, whereas for grants one, two and three it was an average over three tax years.
If you didn’t submit tax returns for all four years, the grant will be based on your most recent consecutive returns. So for example, if you only submitted a return in 2018/19 and 2019/20, the grant will be based on the average over those two years. However if you submitted returns in 2017/18 and 2019/20 but not the year in between, the average will be based only on the 2019/20 return.
Are You Eligible For The Grant?
Here are the eligibility criteria for the fourth SEISS grant:
You must have filed a 2019/20 tax return to be eligible. This is the major difference between the fourth grant and the previous three. The deadline to file this with HMRC was originally 31 January, but the Chancellor specifically said in his 2021 Budget announcement that the scheme will be open to you if you filed by 11.59pm on 2 March.
You must have traded in both tax years 2019/20 and 2020/21 and intend to continue to trade. You cannot make a claim if you have plans to close your business.
Your business must have had a new or continuing impact from coronavirus which you believe will cause a “significant reduction” in trading profits. You’ll need to be able to make a declaration to this effect. In practice, to be able to make the declaration:
1. Your business must continue to be affected by Covid in the claim period, or be newly affected in this time. Your business must be facing an ongoing hit from coronavirus from beginning of February to 30 April, or be newly affected in this period. So you cannot apply if your business was struggling in, say, August, September and October, but is now no longer affected. You also cannot apply if the only impact was increased costs.
2. You need to believe the impact during this period WILL cause a ‘significant reduction’ in trading profits. For many this will be straightforward, but others might not yet be sure. If this is you, you might need to wait until you have a “reasonable belief” that your trading profits are going to be significantly reduced before you know if you can make a claim.
3. This ‘significant reduction’ must be due to ‘reduced demand, activity or capacity’ or being temporarily unable to trade. For example:
– Lower demand, activity or capacity could be fewer customers, cancelled contracts or supply chain issues.
– Being temporarily unable to trade could be because of a local lockdown, being officially told to shield/self-isolate or parental or caring responsibilities.
You must earn at least 50% of your total income from self-employment. If you’re not eligible based on your 2019/2020 self-assessment tax return, HMRC will then look at the tax years 2016/17, 2017/18, 2018/19 and 2019/20 to see if the average of your trading profits across the four years made up more than 50% of your total income.
Non-trading income must not exceed 50% of your total income. Income from other jobs, property, dividends, savings, pensions and taxable benefits all count as ‘non-trading income’ and, to qualify for the SEISS, the total of these combined must NOT exceed 50% of your total income.
Your average trading profit must be £50,000 a year or less. This is essentially a ‘cliff-edge’ requirement – so those whose average annual trading profit is more than £50,000 (to be specific, £50,000.01 and above) won’t be able to get any support from this scheme.
HMRC will first check your 2019/20 tax return – if you meet the requirements for this year, you will be eligible. If you’re not eligible based on your 2019/20 tax return, i.e. you earned more than £50,000, it will then look at the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020. If on average, you earned less than £50,000 over those four years, you will be eligible.
You don’t need to have applied for an earlier grant to get the fourth grant. As long as you meet the eligibility criteria, it is possible to apply for just one or any combination of the four grants.
You can keep working if you claim the grant. Though you need to declare your business has been impacted by coronavirus for the period you’re claiming for. HMRC will check for fraudulent claims.
How To Claim
The online service for the fourth grant will be available from the end of April 2021.
HMRC will contact you directly to give you a date that you can make your claim from. It will be given to you either by email, letter or within the online service.
There will be a fifth grant covering May 2021 to September 2021
For full details of the SEISS visit https://www.gov.uk/