Eligibility for the initial SEISS grants (the first and second grants)

 

You can claim one or both of the initial grants, only if your business is 'adversely' affected by Coronavirus.'

 

To claim the second grant your business must have been adversely affected on or after 14 July 2020.

 

Your business may be adversely affected if any of the following apply:

 

Restrictions on trading:

 

• Government orders have meant that your trade or industry had to close or to be restricted in such a way that your trade closed or is otherwise adversely affected.
• You cannot organise your work or workplace to allow your staff to work safely.
• You cannot serve customers due to social distancing.
• Restrictions have affected your customers or staff.
• Your supply chain is interrupted due to shortages of product, PPE etc.
• One or more of your contracts have been cancelled.
• You have fewer or no customers or clients.

 

Restrictions on you personally:

 

You have been ill or self-isolating or shielding.

You have had to care for others and this disrupted your work.

 

HMRC provides examples of situations were a business affected here.

 

You should keep records to show that you have been adversely affected to include:

 

• Business accounts showing a reduction in turnover or an increase in expenditure.
• Confirmation of any COVID19-related business loans received.
• The dates your business had to close due to lockdown restrictions.
• The dates you or your staff were unable to work due to coronavirus symptoms, shielding or caring responsibilities.

 

Qualifying conditions

 

The same conditions apply to both rounds of grant funding.

 

These conditions relate to eligibility for the grants and not to the amounts you will receive if you do qualify, details of which are set out at 'How will the grant be calculated?' below.

 

You are self-employed and you:

 

• Have submitted your Income Tax Self Assessment tax return for the tax year 2018-19 on or by 23 April 2020.
• Have traded in the tax year 2019-20.
• Are trading when you apply or would be except for COVID-19.
• Intend to continue to trade in the tax year 2020-21.
• Have lost trading/partnership trading profits due to COVID-19. You should keep records to support this.
• Average self-employed trading profits between £0 - £50,000.

 

Additionally, more than half of your total income comes from self-employment.

 

One of the following conditions A to C must be met to be eligible for the scheme:

 

1. Your trading profits/partnership trading profits are between £0 - £50,000 for 2018-19 and those trading profits are more than half of your total taxable income for that year, or
2. Your average trading profits/partnership trading profits for the three years 2016-17, 2017-18, and 2018-19 are between £0 - £50,000 and your average trading profits for those years are more than half of your total taxable average income for those same years, or
3. If you did not trade in 2016-17, your average trading profits/partnership trading profits for the two years 2017-18, and 2018-19 are between £0 - £50,000 and your average trading profits for those years are more than half of your total taxable average income for those same years.

 

From July 2020: proposed modified extra condition for parents, including adoptive ones, who took time out of trading to care for their children within the first 12 months of the birth of the child or within 12 months of an adoption placement:

 

• If your trading profits dipped in 2018-19 due to parenting, you will now be able to use either their 2017-18 or both their 2016-17 and 2017-18 Self Assessment returns as the basis for their eligibility for the SEISS.

 

Loan charge payers

 

The qualifying profits conditions are modified for persons who are subject to the loan charge.  A person is subject to the loan charge if:

 

(a) on 26 March 2020 the person is chargeable to Income Tax on any amount by reason of Schedule 11 or 12 to the Finance (No. 2) Act 2017 (loan charge) as enacted as at that date, or

 

(b) the person would be so chargeable but for entering into a contract settlement on or after 20 December 2019.

 

If you are a Loan Charge payer, one of the following conditions D or E must be met.

 

D. If you were not trading in 2016-17, your trading profits/partnership trading profits are between £0 - £50,000 for 2017-  18 and those trading profits are more than half of your total taxable income for that year, or

 

E. Your average trading profits/partnership trading profits for the two years 2017-18, and 2016-17 are between £0 - £50,000 and your average trading profits for those years are more than half of your total taxable average income for those same years.

 

In addition (for loan charge payers only) you do not have to file your 2018/2019 Self Assessment tax return by 23 April 2020 as the 30 September 2020 loan charge settlement deadline still applies.

 

Non-UK residents

 

Non-UK residents and non-domiciled individuals claiming the remittance basis:

 

Must self certify that their UK trading profits are at least equal to their other worldwide income.

 

Scottish taxpayers: Newly self-employed

 

If you are not eligible for the SEISS because  you are newly self employed you may be eligible for the Scotland's: Newly Self-Employed Hardship Fund.

 

New parents - added 26/6

 

• Self-employed parents whose trading profits dipped in 2018/19 because they took time out to have children will be able to claim the SEISS.
• Parents, including adoptive ones, who took time out of trading to care for their children within the first 12 months of the birth of the child or within 12 months of adoption placement, will now be able to use either their 2017-18 or both their 2016-17 and 2017-18 Self Assessment returns as the basis for their eligibility for the SEISS.
• They will also need to meet the other standard eligibility criteria for support under the SEISS.
• Further details of the change for self-employed parents will be set out by the start of July in published guidance. This measure was announced on 17 June according to the treasury website.

 

FAQs

 

Who is self-employed?

 

• Anyone running their own business as a sole trader or partner and who reports their taxable profits or losses on the Self-Employment or Partnership pages of their Self Assessment tax return.
• Those who run property-based businesses and report their profits in the Land & Property pages of their return are not eligible for the SEISS.

 

What is trading income?

 

• Trading income is your trading income less allowable expenses, less capital allowances and current year losses.
• Carried forward losses from another year are not deducted.

 

A 'trade' includes a trade, profession or vocation chargeable to income tax.

 

What is total income?

 

Total income means the total of:

 

• Income from all employments
• Trading profits
• Property income
• Dividends
• Savings income
• Pension income
• Miscellaneous income (including social security income).

 

It does not include losses.  (This was added 20 July.)

 

Farmers, market gardeners and authors: Averaging

 

• Where an averaging claim has been made, the figures should be adjusted to exclude the averaging adjustment, this applies for both trading income and total income.

 

Trading periods

 

If you started trading between the years 2016 to 2019, HMRC will only use those years for which you filed a Self Assessment tax return.

 

Profit tests

 

HMRC give the following example (14 April 2020):

 

​

	2016 to 2017	2017 to 2018	2018 to 2019	Total for the 3 tax years
Trading profit	£50,000	£50,000	£(10,000)	£90,000
Pension income	£15,000	£15,000	£15,000	£45,000
Total income	£65,000	£65,000	£5,000	£135,000
Trading profit are more than half of your total income	Yes	Yes	No	Yes

 

 

So even if you made a loss in the tax year 2018 to 2019, you would still be eligible for the grant because your average trading profit for the three tax years:

 

• Is £30,000 - which is less than £50,000.
• Is more than half of your total income of £45,000.

 

Making a claim

 

1. HMRC's online eligibility checker checks what has been reported under Self Assessment.

 

• Agents can use the online checker which will indicate from what date a claim may be made if the outcome is positive.
• The checker requires the taxpayer's UTR and National Insurance (NI) number to verify if an individual is eligible for the grant.
• If the result of the online checker is negative there is an option to ask HMRC to review eligibility.

 

2. HMRC's SEISS claims portal went live on 13 May 2020.

 

• Claims cannot be made by taxpayers' agents and must be made by the individual businesses themselves. If the taxpayer's agent attempts to make a claim on their behalf this will delay the claim as it will trigger a fraud alert.  A request for a review as to eligiblity or the amount of the claim may be made by the agent.

 

3. Claims for the first three months of the grant must be made by 13 July 2020.

 

4. Claims for the second and final three months commencing in August 2020 and must be made on or before 19 October 2020.

 

How is the grant being calculated?

 

The amount of SEISS payment for the first three month period is the lower of:

 

a) £7,500 (1st grant) and

 

b) (Average* trading profit/12) x 80% x 3

 

This means that you need to have made a past average profit of £37,500 in order to expect to receive the full £7,500.

 

The amount of the SEISS payment for the second and final three month period is the lower of:

 

a) £6,570 (2nd grant) and

 

b) (Average* trading profit/12) x 70% x 3

 

This means that you need to have made a slightly higher past average profit, of £37,543, in order to expect to receive the full £6,570.

 

*To work out the average HMRC will add together the total trading profit for the three tax years, or less, if you have been trading a shorter time and then divide by three or the number of months and use this to calculate a monthly amount.

 

On 14 April 2020 HMRC provided additional guidance and examples as to how they will work out trading income for the purposes of the scheme. They will take taxable trading profits after:

 

• Allowable expenses including flat rate deductions.
• Capital allowances.
• Business expenses deducted through the trading allowance.
• Qualifying care relief.
• Current year losses.
• No losses brought forward or personal allowances will be deducted.

 

 

HMRC examples:

 

Example 1

 

If your total trading income (turnover) in each of the tax years 2016 to 2017, 2017 to 2018 and 2018 to 2019 was £20,000 and you claimed the £1,000 trading allowance each year:

 

This is worked out as:

 

1. £20,000 deduct the trading allowance of £1,000 = £19,000.
2. Multiply £19,000 by 3 = £57,000.
3. Divide £57,000 by 3 = £19,000.

 

Your average trading profit would be £19,000.

 

Example 2: You have more than one trade in the same tax year

 

We will add together all profits and losses for all these trades to work out your trading profit.

 

If you only traded in the tax year 2018 to 2019 and made a £60,000 profit for your first trade, and then a £20,000 loss for your second trade, your trading profit for that year would be:

 

Trade 1 £60,000 profit deduct trade 2 £20,000 loss = £40,000

 

Example 3: You have traded for more than one year

 

To work out your average trading profit we will add together all profits and losses for all tax years you’ve had continuous trade.

 

If you made:

 

• £60,000 profit in the tax year 2016 to 2017.
• £60,000 profit in the tax year 2017 to 2018.
• £30,000 loss in the tax year 2018 to 2019.

 

1. Add £60,000 and £60,000 then deduct £30,000 loss = £90,000
2. Then divide £90,000 by three.

 

Your average trading profit for the three tax years would be £30,000.

 

Example 4

 

If you did not trade in the tax year 2016 to 2017 but made:

 

• £25,000 of profit in the tax year 2017 to 2018.
• £45,000 of profit in the tax year 2018 to 2019.

 

1. Add £25,000 and £45,000 = £70,000.
2. Then divide £70,000 by two.

 

Your average trading profit for the two tax years would be £35,000.

 

 

Averaging relief

 

If you are a self-employed farmer, market gardener, creative author or artist claiming Averaging relief HMRC will use the amount of profit before the impact of the averaging claims to work out:

 

• If you can claim the grant.
• How much grant you will receive.

 

I think I have been paid too much, what should I do?

 

You must tell HMRC if you think your grant has been overpaid or that you should not have claimed, as if you do not you may be charged a penalty of up to 100% of the grant amount. You can do this online here.

• You will need your UTR and grant claim reference. Once you have completed the online form you will be provided with bank details to make payment.
• You can also voluntarily pay back some of the grant.

 

If you received the grant:

 

• Before 22 July 2020, you must tell HMRC on or before 20 October 2020.
• On or after 22 July 2020, you must tell HMRC within 90 days of receiving the grant.

 

If you did not know you were ineligible for the grant when you received it, HMRC will only charge a penalty if you have not repaid the grant by 31 January 2022.

 

Finance Act 2020 includes details of the powers HMRC will have to deal with incorrect claims. They will be able to:

• Use their information and inspection powers to check a claim has not been overpaid.
• Raise Income Tax assessments to recover amounts from the recipient of a payment which they are not entitled to. The usual time limits will apply to these assessments. See Time limits for tax assessments, claims and refunds
• Charge a penalty where a person deliberately makes an incorrect claim for SEISS and they fail to notify HMRC about the situation within 90 days. Originally a 30 day notification requirement was suggested here.
  • Penalties will fall under the failure to notify rules and, as these will be treated as deliberate and concealed actions, the penalties could be anything between 30% and 100% of the overclaimed amounts.

The draft legislation also sets out that the circumstances in which a person is not entitled to a Coronavirus support payment include where they cease to be entitled to it after they have received it because of a change of circumstances.

• In this situation the payment becomes taxable at the time that the recipient ceased to be entitled to it and not when it was received.

 

Members of partnerships

 

• Each partner in a partnership must make a claim based on their own circumstances.
• HMRC will work out eligibility based on your share of the partnership’s trading profits.
• If the partnership agreement requires the grant to be paid into the partnership pot, the partnership should give it back to you.

 

Tax and benefit implications

 

The grants are subject to tax and NIC as self-employed income. The legislation for the tax treatment of the grants is included in clause 19 schedule 1 of Finance Bill 2020 which provides that:

 

• Grants received prior to 6 April 2021 are to be included in taxable profits for the 2020/21 tax year only and not for 2019/20. Under Finance Bill 2021 grants received after 6 April 2021 are to be taxed in the year of receipt.
• The grants are classed as self-employed income for the purposes of universal credit claims.
• Where a grant payment is received for more than one self-employment business it must be apportioned between them on a just and reasonable basis.
• Where the business has ceased, the grants are to be taxed as post-cessation receipts.

 

VAT implications

 

HMRC have not provided any guidance as to whether the grants will be subject to VAT or count towards turnover for VAT registration limits. Normal principles are expected to apply to mean:

 

• The grants would be outside the scope of VAT and no output VAT should have to be accounted for.
• The grant income should be disregarded for VAT registration and deregistration limits.

 

If you did not submit your Income Tax Self Assessment tax return for the tax year 2018-19 by 31 January 2020, you must have done so by 23 April 2020.

 

HMRC are using data on 2018/19 returns already submitted to identify those eligible and will risk-assess any late returns filed before the 23 April 2020 deadline in the usual way.

 

• You must be registered as self-employed and have filed a 2018-19 tax return.
• For those who missed the 31 January 2020 return deadline, there was an extension to 23 April 2020 in which to file one.
• Any amendments made to 2019 tax returns after 6 pm on 26 March 2020 will not be taken into account.
• The scheme commenced paying out for the first three months from 26 May 2020. For the second-period claims and payments will be made in August. The grant will be paid directly into your bank account, in one instalment.

 

 

 

Useful guides on this topic

 

COVID-19: Government support tracker

This tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19.

 

External links

 

HMRC online eligibility checker

 

HMRC guidance:

 

• How your trading conditions affect your eligibility for the SEISS
• Check if you can claim a grant through the SEISS
• Claim a grant through the SEISS
• How HMRC works out trading profits and non-trading income for the SEISS
• How your circumstances affect eligibility for the SEISS
• Return to your claim for the SEISS
• Tell HMRC and pay the SEISS grant back

 

Coronavirus Bill 23 March 2020

 

On 1 May 2020 HM Treasury published The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Self-Employment Income Support Scheme) Direction this confirms the detail of the scheme.

 

On 1 July 2020 HM treasury published The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Self-Employment Income Support Scheme Extension) Direction confirming details of the extension of the scheme

 

On 24 November 2020 HM Treasury published The Coronavirus Act 2020 Functions of Her Majesty's Revenue and Customs (Self-Employment Income Support Scheme Grant Extension 3) Direction and associated schedule confirming details of the extension of the scheme.

 

House of Commons Briefing paper 23 June 2020: Coronavirus: Self Employment Income Support Scheme

 

Finance Bill 2020 schedule 1 clause 19

 

Self-Employment Income Support Scheme Extension 4 Direction

 

 

Fourth grant: February, March and April 2021

 

 

The fourth SEISS grant will:

 

• Be based on 80% of 3 months’ average trading profits, capped at £7,500.
• Take into account 2019-20 tax returns and be accessible to those who became self-employed in 2019-20.
• Be paid in a single instalment.

 

Eligibility

 

Self-employed individuals and members of a partnership can claim.

 

• HMRC will first look at 2019-20:
  • Trading profits must be £50,000 or less and at least equal to non-trading income.
• Where taxpayers are not eligible based on 2019-20, HMRC will look at 2016-17, 2017-18, 2018-19 and 2019-20.
  • Average trading profits must be £50,000 or less and at least equal to non-trading income.
• Taxpayers must have traded in both 2019-20 and 2020-21.
  • The 2019-20 tax return must have been submitted by 3 March 2021.
  • 2016-17, 2017-18 and 2018-19 tax returns will only be taken into account if they were submitted before 3 March 2021.
  • HMRC will not take amendments into account where they were submitted on or after 3 March 2021.
• Taxpayers must:
  • Be currently trading, but impacted by reduced demand due to Coronavirus, or
  • Have been trading but are temporarily unable to do so due to Coronavirus.
• It will be necessary for grant claimants to declare that they:
  • Intend to continue to trade, and
  • 'Reasonably believe' there will be a significant reduction in their trading profits for the accounting period, due to:
    • Reduced business activity, capacity or demand, or
    • Inability to trade, due to Coronavirus between 1 February 2021 and 30 April 2021.
• HMRC expects taxpayers to make an honest assessment about whether they reasonably believe their business will have a significant reduction in profits in the accounting period.
  • Evidence must be kept to support this.
• When considering whether there will be a significant reduction in trading profits, it is not necessary to consider any other Coronavirus scheme support payments.

 

Currently trading: reduced demand

 

This might include where you:

 

• Have fewer customers or clients than you would normally expect, resulting in reduced activity due to social distancing or government restrictions.
• Have one or more contracts that have been cancelled and not replaced.
• Carried out less work due to supply chain disruptions.

 

You must not claim if the only impact on your business is increased costs. For example, if you have had to purchase face masks and cleaning supplies. This would not be considered as reduced activity, capacity or demand.

 

HMRC have given a number of examples of reduced demand: How your trading conditions affect your eligibility for the SEISS.

 

If you are currently trading but have reduced demand due to Coronavirus you must keep evidence to support this fact at the time of your claim. Examples may include:

 

• Business accounts showing a reduction in activity compared to previous years.
• Records of reduced or cancelled contracts or appointments.
• Fewer invoices.
• A record of dates where you had reduced demand or capacity due to government restrictions.

 

Unable to trade

 

If your business is temporarily unable to trade due to Coronavirus, you must keep evidence, such as:

 

• A record of dates where you had to close due to government restrictions.
• NHS Test and Trace communications: if you’ve been instructed to self-isolate in-line with NHS guidelines and are unable to work from home (if you have been abroad and have to self-isolate, this does not count).
• A letter or email from the NHS asking you to shield.
• Test results if you have been diagnosed with Coronavirus.
• Letters or emails from your child’s school if you have had parental caring responsibilities.

 

If you had to close before 1 February 2021 and continued to be closed for a period of time up to 30 April 2021, you can still claim as long as you are eligible.

 

HMRC have given a number of examples of being unable to trade: How your trading conditions affect your eligibility for the SEISS.

 

How to claim

 

• The online claims service became available on 22 April 2021.
• Claims must be made by 1 June 2021.
• HMRC will contact eligible taxpayers by e-mail, letter or online, in mid-April 2021 to give a personal claim date.
  • This will be the earliest date claims can be made.
• HMRC will pay claims within 6 working days.

 

Newly eligible taxpayers

 

• HMRC is expected to contact taxpayers directly who became self-employed in 2019-20 that may be eligible for the grant.
  • Newly eligible taxpayers must have started self-employment on or after 6 April 2019 and have submitted their 2019-20 tax return on or before 2 March 2021.
• Not all newly self-employed taxpayers will be contacted. Those that do not receive contact should wait to receive their personal claim date in mid-April.
  • Letters will be sent from 8 March 2021 until mid-April.
  • Calls will be made from 9 March 2021.

 

Information needed to claim

 

You will need your:

 

• Ten digit self-assessment Unique Taxpayer Reference (UTR).
• National Insurance number.
• Government Gateway user ID and password.
• UK bank details (where a Bacs payment can be accepted) including:
  • Bank account number.
  • Sort code.
  • Name on the account.
  • Address linked to your bank account.
• It may be necessary to answer questions about your passport, driving licence or information held on your credit file.

 

Taxpayers must make the claim directly. If tax agents or advisers claim on behalf of clients this will trigger a fraud alert, which will delay payment.

 

Record keeping

 

Details must be kept of:

 

• The amount claimed.
• The grant claim reference.

 

If your business recovers after you have claimed, your eligibility will not be affected.

 

• Eligibility is based on your reasonable belief that your trading profits would have been significantly reduced at the time you made your claim.
• You must keep evidence to support this.
  • See 'Currently trading: reduced demand' and 'Unable to trade' above.

 

Compliance

 

• HMRC will check claims and take appropriate action to withhold or recover payments found to be dishonest or inaccurate.
  • Penalties may be payable if claims are made where the taxpayer knows they are not eligible for the grant and do not tell HMRC.

 

Tax return amendments: HMRC notification

 

• HMRC need to be notified of amendments to tax returns made on or after 3 March 2021 where, as a result of the amendment, either:
  • The taxpayer is no longer entitled to the fourth SEISS grant.
  • The taxpayer is entitled to a lower fourth SEISS grant.
• These notification rules apply to amendments of any relevant tax return.
  • This would include 2016-17, 2017-18, 2018-19 and 2019-20.
• Where the taxpayer is:
  • No longer eligible for the grant, the whole amount must be returned to HMRC 'immediately'.
  • Eligible for a reduced grant, the excess must be returned to HMRC 'immediately'.
    • The Direction specifically uses the term 'immediately': it is not known how strictly this will be applied in practice.
• The notification rules do not apply if either:
  • The original fourth SEISS grant was £100 or less.
  • The decrease in fourth grant entitlement is £100 or less.

 

Notification deadline and penalties

 

• HMRC need to be informed:
  • Within 90 days of receiving the grant, if the amendment was made before claiming the grant.
  • Within 90 days of amending the tax return, if the amendment was made after receiving the grant.
• Penalties may be charged if HMRC are not informed of the change in grant entitlement unless the grant is reduced by £100 or less.

 

How to notify HMRC

 

• HMRC have provided an online form.
• After completing the form, HMRC will send a letter confirming if the SEISS grant has been affected, how much must be paid back and how to pay it.

 

Members of partnerships

 

• Each partner in a partnership must make a claim based on their own circumstances.
• HMRC will work out eligibility based on the partner's share of the partnership’s trading profits.
• If the partnership agreement requires the grant to be paid into the partnership pot, the partnership should give it back to you.

 

New parents

 

• If having a new child affected your 2019-20 tax return, you may be able to make a claim if:
  • The trading profits and total income reported in your 2019-20 tax return mean you do not meet the eligibility criteria for the grant.
  • You did not submit a 2019-20 tax return

 

Loan charge

 

You may be able to claim a grant if you:

 

• Have received payment for work or services in the form of a loan or other form of credit covered by the loan charge, and
• Were self-employed in the tax year 2017-18 and have submitted your tax return for that year.

 

Your 2019-20 return must have been submitted by 3 March 2021 and you must have continued to trade in tax year 2020-21 and intend to continue to trade in 2021-22.

 

Averaging relief

 

If you are a self-employed farmer, market gardener, creative author or artist claiming averaging relief HMRC will use the amount of profit before the impact of the averaging claims to work out:

 

• If you can claim the grant.
• How much grant you will receive.

 

Non-UK residents

 

Non-UK residents and non-domiciled individuals claiming the remittance basis may be eligible for the grant, subject to confirming certain criteria with HMRC.

 

Trading profits

 

To be eligible for a grant, trading profits must be:

 

• No more than £50,000, and
• Equal to or more than your non-trading income.

 

What is trading income?

 

• Trading income is your income from trade less allowable expenses and capital allowances and current year losses.
• Carried forward losses from another year are not deducted.

 

A 'trade' includes a trade, profession or vocation chargeable to Income Tax whether from self-employment or in a partnership.

 

For the grant, profits and losses of all trades in the year are added together.

 

What is non-trading income?

 

Total income means the total of:

 

• Income from all employments.
• Property income.
• Dividends.
• Savings income.
• Pension income.
• Miscellaneous income (including social security income).

 

It does not include losses.

 

Average trading profits

 

• If you started trading in 2019-20, HMRC will only look at 2019-20 when determining eligibility.
• If you have traded for longer, eligibility will be based on either:
  • 2019-20, or
  • An average of 2016-17, 2017-18, 2018-19 and 2019-20, if not eligible based on 2019-20 alone.
• If there are gaps in years you have traded, only the most recent year(s) after the gap will be used.

 

HMRC example

 

                    2016-17 2017-18 2018-19  2019-20  Average    Total

Trading profit £     50,000  50,000  36,000  (10,000)  31,500  126,000

Non-trading income £ 15,000  15,000  16,000   15,000      N/A   61,000

 

• Not eligible based on 2019-20 alone as non-trading income is greater than trading profits.
• Eligible based on 2016-17 to 2019-20 as:
  • Average trading profits (£31,500) are less than £50,000.
  • Total trading profits (£126,000) is greater than total non-trading profits (£61,000).

 

Calculating the grant

 

• HMRC will use an average of trading profits from up to 4 years of tax returns to calculate the grant.
  • If there is a gap in trading, only the most recent returns after the gap will be used in the calculation.
• The fourth SEISS grant is calculated at 80% of 3 months’ average trading profits, capped at £7,500.
• If a taxpayer:
  • Started trading in 2019-20: trading profits of that year only will be used to calculate the grant.
  • Traded for all years 2016-17 to 2019-20: average trading profits will be calculated by adding together profits and losses for all 4 tax years, then dividing by 4.
  • Did not trade in 2016-17: average trading profits will be calculated by adding together profits and losses for all 2017-18 to 2019-20, then dividing by 3.
  • Did not trade in 2017-18: average trading profits will be calculated by adding together profits and losses for 2018-19 and 2019-20, then dividing by 2.
  • Did not trade in 2018-19: trading profits will be based on 2019-20 when calculating the grant.

 

Continuing with the above example, average trading profits were £31,500.

 

• Divide by 12: £2,625
• Multiply by 3: £7,875
• 80% of £7,875: £6,300.

 

The grant calculated of £6,300 is below £7,500: £6,300 is due to be paid.

 

Third grant: 1 November 2020 to 29 January 2021

 

In order to qualify for the third grant:

 

• You must be a self-employed individual or a member of a partnership.
• You must have traded in the tax years 2018-19 and 2019-20.
• Your 2018-19 tax return must have been submitted no later than 23 April 2020.
• You must either:
  • Be currently trading but impacted by reduced demand due to Coronavirus.
  • Or have been trading but are temporarily unable to do so due to Coronavirus.
• You will need to declare that you:
  • Intend to continue to trade, and
  • 'Reasonably believe' there will be a 'significant reduction' in your trading profits for the accounting period, due to:
    • Reduced business activity, capacity or demand, or
    • Inability to trade, due to Coronavirus.
  • HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits in the accounting period.
    • Evidence must be kept to support this.

 

Currently trading: reduced demand

 

This might include where you:

 

• Have fewer customers or clients than you would normally expect, resulting in reduced activity due to social distancing or government restrictions.
• Have one or more contracts that have been cancelled and not replaced.
• Carried out less work due to supply chain disruptions.

 

You must not claim if the only impact on your business is increased costs. For example, if you have had to purchase face masks and cleaning supplies. This would not be considered as reduced demand.

 

HMRC have given a number of examples of reduced demand: How your trading conditions affect your eligibility for the SEISS.

 

If you are currently trading but have reduced demand due to Coronavirus you must keep evidence to support this fact at the time of your claim. Examples may include:

 

• Business accounts showing a reduction in activity compared to previous years.
• Records of reduced or cancelled contracts or appointments.
• Fewer invoices.
• A record of dates where you had reduced demand or capacity due to government restrictions.

 

Unable to trade

 

If your business is temporarily unable to trade due to Coronavirus, you must keep evidence, such as:

 

• A record of dates where you had to close due to government restrictions.
• NHS Test and Trace communications: if you’ve been instructed to self-isolate in-line with NHS guidelines and are unable to work from home (if you have been abroad and have to self-isolate, this does not count).
• A letter or email from the NHS asking you to shield.
• Test results if you have been diagnosed with Coronavirus.
• Letters or emails from your child’s school if you have had parental caring responsibilities.

 

If you had to close before 1 November 2020 and continued to be closed for a period of time up to 29 January 2021, you can still claim as long as you are eligible.

 

HMRC have given a number of examples of being unable to trade: How your trading conditions affect your eligibility for the SEISS.

 

Information needed to claim

 

You will need your:

 

• Ten digit self-assessment Unique Taxpayer Reference (UTR).
• National Insurance number.
• Government Gateway user ID and password.
• UK bank details (where a Bacs payment can be accepted) including:
  • Bank account number.
  • Sort code.
  • Name on the account.
  • Address linked to your bank account.

 

Taxpayers must make the claim directly. If tax agents or advisers claim on behalf of clients this will trigger a fraud alert, which will delay payment.

 

Details must be kept of:

 

• The amount claimed.
• The grant claim reference.

 

Members of partnerships

 

• Each partner in a partnership must make a claim based on their own circumstances.
• HMRC will work out eligibility based on your share of the partnership’s trading profits.
• If the partnership agreement requires the grant to be paid into the partnership pot, the partnership should give it back to you.

 

New parents

 

• If new parents are already eligible for the grant based on 2016-17, 2017-18 and 2018-19 tax returns, the grant amount will not change.
• New parents may be able to make a claim if having a new child either:
  • Affected the trading profits or total income  reported for the tax year 2018-19, or
  • Meant they did not submit a tax return for the tax year 2018-19.

 

Loan charge

 

You may be able to claim a grant if you have:

 

• Have received payment for work or services in the form of a loan or other form of credit covered by the loan charge, and
• Were self-employed in the tax year 2017-18 and have submitted your tax return for that year.

 

Averaging relief

 

If you are a self-employed farmer, market gardener, creative author or artist claiming averaging relief HMRC will use the amount of profit before the impact of the averaging claims to work out:

 

• If you can claim the grant.
• How much grant you will receive.

 

Non-UK residents

 

Non-UK residents and non-domiciled individuals claiming the remittance basis may be eligible for the grant, subject to confirming certain criteria with HMRC.

 

What is trading income?

 

• Trading income is your income from trade less allowable expenses and capital allowances and current year losses.
• Carried forward losses from another year are not deducted.

 

A 'trade' includes a trade, profession or vocation chargeable to Income Tax whether from self-employment or in a partnership.

 

For the grant, profits and losses of all trades in the year are added together.

 

What is non-trading income?

 

Total income means the total of:

 

• Income from all employments.
• Property income.
• Dividends.
• Savings income.
• Pension income.
• Miscellaneous income (including social security income).

 

It does not include losses.

 

Average trading profits

 

• To work out your average trading profit, HMRC add together all profits and losses for all three tax years that you have had continuous trade, then divide by three.
  • This will include the tax years 2016-17, 2017-18 and 2018-19.
• If you did not trade in the 2016-17 tax year, HMRC add together all profits and losses for the tax years 2017-18 and 2018-19, then divide by two.
• If you did not trade in the 2017-18 tax year (regardless of whether you traded in the 2016-17 tax year), HMRC will work out your average trading profit based on 2018-19 only.

 

Profit tests

 

HMRC give the following example:

 

 

	2016 to 2017	2017 to 2018	2018 to 2019	Total for the 3 tax years
Trading profit	£50,000	£50,000	£(10,000)	£90,000
Pension income	£15,000	£15,000	£15,000	£45,000
Total income	£65,000	£65,000	£5,000	£135,000
Trading profit are more than half of your total income	Yes	Yes	No	Yes

Despite the loss in the tax year 2018-19, you would still be eligible for the grant because your average trading profit for the three tax years:

 

Is £30,000, which is less than £50,000.

Is more than half of your total income of £45,000.