Guidance on the Self Employed Income Support Scheme (SEISS)
(With thanks to ICAEW for this information for our clients)
Information on the Self-employment Income Support Scheme (SEISS), including information on the eligibility criteria and the level of the grant, as well as the application process and requesting reviews.
What you need to know
Who can claim: Self-employed individuals or a member of a partnership (as long as certain eligibility criteria are met, see below). Limited companies and trusts are not entitled to claim.
Subject to eligibility, the second, third, fourth and fifth grants can be claimed even if previous grants were not claimed.
How much can be claimed:
- The fifth grant has been set at 80% of three months’ average trading profits capped at £7,500 for those whose turnover has reduced by 30% or more.
Those with a turnover reduction of less than 30% will receive a grant based on 30% of three months’ average trading profits, capped at £2,850.
Details of how the turnover test will be applied for the fifth grant are not yet available.
- The fourth grant is calculated as 80% of the average of three months' trading profits, up to a maximum of £7,500.
- The third grand was 80% up to a maximum of £7,500.
- The second grant was 70% up to a maximum of £6,570.
- The first grant was 80% up to a maximum of £7,500.
Average trading profits: Average trading profits for the fourth and fifth grants is based on 2016/17, 2017/18, 2018/19 and 2019/20, where available, with some exceptions for particular circumstances.
Average trading profits for grants one to three were based on 2016/17, 2017/18 and 2018/19.
When can claims be made: The online claims portal will open for the fourth grant in late April and close on 1 June 2021. Claims for the fifth grant will open in late July.
When will grants be paid: Grants are paid within six working days of the claim being submitted.
Who makes the application: Claims have to made by the taxpayer themselves and cannot be made by agents.
Who does the calculations: HMRC does all the calculations needed for the claims, using the information in the submitted tax returns. The taxpayer does not have to provide any figures.
Is the grant taxable: Yes, the grants are subject to income tax and self-employment national insurance contributions in the year in which they are received. The grants were originally all taxable in 2020/21; following the extension of the scheme, Finance Bill 2021 includes a measure to change the tax treatment to a receipts basis (irrespective of basis periods). Different rules apply where a partnership agreement states that the grant must be paid into the partnership and distributed to partners in accordance with the partnership agreement.
Fraud warning
Fraudsters are targeting those who might be claiming SEISS grants. To guard against fraud, any emails and SMS messages from HMRC do not include active links. If a taxpayer receives an email or SMS purporting to come from HMRC which includes an active link, that email or SMS is a scam.
Eligibility criteria
First and second grants
Self-employed individuals and members of a partnership are eligible where the taxpayer:
- submitted their 2018/19 self assessment tax return by 23 April 2020;
- traded in the tax year 2019/20;
- intends to continue to trade in the tax year 2020/21;
- carries on a trade which has been adversely affected by coronavirus.
HMRC has provided some guidance on the meaning of ‘adversely affected’. This includes being unable to work because the taxpayer is shielding, self-isolating or is on sick leave or has care responsibilities because of coronavirus. It also includes scaling down, temporarily stopping trading or incurring additional costs because:
- the supply chain has been interrupted;
- the business has fewer or no customers;
- staff are unable to work
- one or more contracts have been cancelled; or
- protective equipment was purchased to comply with social distancing rules.
The lack of any mention of specific, measurable reductions in income is intentional. The taxpayer should keep evidence of the impact on their trade, but there is no link between the amount of the grant and the financial loss. The list is not exhaustive; for example, a business might be adversely affected if it has to write off a bad debt because a customer has ceased trading due to coronavirus.
The scheme specifically allows a claim where the trade has continued, so long as the trade is ‘adversely affected’. During the application process, the taxpayer is asked to confirm that they meet the eligibility criteria, but the importance of the questions may be missed by some and others may worry about them unnecessarily.
HMRC’s original guidance was not specific about when a business needs to be adversely affected to qualify for a grant. This changed and to qualify for the first grant the business must have been adversely affected on or before 13 July 2020. To qualify for the second grant the business must be adversely affected after 13 July 2020.
The taxpayer's trading profits must also be no more than £50,000 and more than half of their total income for either:
- the tax year 2018/19; or
- the average of the tax years 2016/17, 2017/18, and 2018/19.
The amount of the grant is based on the average trading profits for the relevant years. Examples are available in HMRC’s guidance. Note that the grant is calculated using the trading profits shown on the tax returns; no adjustment is made if the taxpayer traded for only part of a tax year.
HMRC has published guidance for those with particular circumstances.
Third grant
Additional, tighter, eligibility criteria were introduced for the third grant.
To be eligible for the third grant, taxpayers must meet the eligibility criteria for the first and second grants and also:
- experience reduced activity, capacity or demand or be temporarily unable to trade in the period from 1 November 2020 to 29 January 2021, compared with what could reasonably have been expected but for the adverse effect on the business of coronavirus, and
- the claimant reasonably believes the impact will cause a significant reduction in trading profits for the relevant accounting period, compared with what would otherwise have reasonably been expected as a result of that reduced activity, capacity or demand.
HMRC has published new guidance and examples to help claimants check whether they are eligible.
The significant reduction in trading profits test is applied to the accounting period as a whole. For many taxpayers, for example those that use a 31 March or 5 April accounting date, the significant reduction of trading profits will be expected to appear in the results they report on their 2020/21 tax return. However, some taxpayers, for example those that use a 30 April accounting date, will not report the trading results for the relevant period until their 2021/22 tax return.
This means that claimants will have to forecast their results to establish eligibility and it will be difficult for HMRC to enforce effectively. HMRC’s guidance indicates that it expects claimants to make ‘an honest assessment’ about whether they reasonably believe that their business will have a significant reduction in profits.
HMRC has specifically said that a reduction in profits due to increased costs (such as having to buy masks) does not count for this purpose.
No claim can be made where the reduced activity, capacity or demand is caused solely because the person is required to self-isolate, or care for a person required to self-isolate, as a result of travelling to the UK.
Fourth and fifth grants
The eligibility criteria have been revised for the fourth and fifth grants to take 2019/20 tax returns into account, but are otherwise unchanged from the third grant.
Self-employed individuals and members of a partnership are eligible where the taxpayer:
- submitted their 2019/20 self assessment tax return by 2 March 2021;
- traded in the tax years 2019/20 and 2020/21;
- is currently trading but is impacted by reduced demand due to coronavirus, or has been trading but is temporarily unable to do so due to coronavirus;
- intends to continue to trade; and
- reasonably believes there will be a significant reduction in their trading profits.
The taxpayer's trading profits must be no more than £50,000 and more than half of their total income for either:
- the tax year 2019/20; or
- the average of the tax years 2016/17, 2017/18, 2018/19 and 2019/20.
For the fourth and fifth grants HMRC will base its calculations on the tax return data for 2016/17 to 2019/20 held in its systems on 2 March 2021. All 2016/17 to 2019/20 tax returns filed by 2 March 2021 will be taken into account, as will any amendments, assessments or contract settlements made by that date.
What time period is covered?
HMRC and HMT have confirmed to the Tax Faculty that, despite communications to the contrary, SEISS grants do not relate to any particular periods or seek to replace lost income over a particular period.
- The first grant, billed as covering March to May 2020, was available to businesses adversely affected up to 13 July 2020.(APPLICATIONS CLOSED)
- The second grant, billed as covering June to August 2020, was available to businesses affected on or after 14 July 2020.(APPLICATIONS CLOSED)
- The third grant, billed as covering November 2020 to January 2021, was available to businesses impacted between 1 November 2020 and 29 January 2021.(APPLICATIONS CLOSED)
- The fourth grant, billed as covering February to April 2021, is available to businesses impacted between 1 February and 30 April 2021.(APPLICATIONS BEFORE 1.6.21)
- The fifth grant, billed as covering May to September 2021, is expected to be available to businesses impacted between 1 May and 30 September 2021.
The fifth grant is based on three months trading profits despite covering a five-month period. HMRC has indicated that this approach is intended to tailor support as the economy opens up.
It also notes that employers will be required to contribute to furloughed employees’ income in July, August and September 2021, and that the self-employed can work and claim whereas no claim under the Coronavirus Job Retention Scheme is possible for hours worked.
Details of how the turnover test will be applied for the fifth grant are not yet available.
How to apply
HMRC did provide an eligibility checker but that has now been withdrawn.
The claims portal is now open for the fourth grant and taxpayers must make their claim on or before 1 June 2021.
It will open in late July for 2021 for the fifth grant.
Applications closed:
- for the third grant on 29 January 2021;
- for the second grant on 19 October 2020; and
- for the first grant on 13 July 2020.
Taxpayers log in to their government gateway account (or select the option to create an account) to complete the application process.
They are presented with a calculation of the amount of the grant and are asked to:
- read and accept the eligibility criteria;
- complete a declaration, including to confirm that they intend to continue to trade, the business has been adversely affected by coronavirus and has experienced reduced activity, capacity or demand which they reasonably believe will cause a significant reduction in trading profits; and
- supply the bank account details into which they would like the grant to be paid.
The taxpayer does not need to provide any information about their income – the calculations are all done by HMRC based on the tax returns submitted.
Taxpayers should keep a copy of the calculation and a record of the claim reference number. It is also important to keep evidence that the business has experienced reduced activity, capacity or demand or has been temporarily unable to trade, such as:
- business accounts showing a reduction in turnover or activity;
- records of cancelled contracts or appointments;
- records of dates where the business had reduced capacity or demand or had to close due to lockdown restrictions; or
- records of Test and Trace instructions to self-isolate, NHS letters advising shielding, coronavirus test results or communications from schools confirming parental caring responsibilities.
HMRC will check the claim and expects to make payments within six working days of the application being submitted.
Making claims using an agent or adviser
HMRC is warning taxpayers that they must make the claim themselves. If an agent or adviser attempts to make a claim on behalf of a client this will trigger a fraud alert and the taxpayer will have to contact HMRC. This will cause a significant delay to payment.
Creating a government gateway ID
Taxpayers who already have a government gateway ID which gives access to HMRC’s self assessment services will be able to use that ID when applying for their SEISS grant.
Those who do not have a government gateway ID are prompted to create one as the first step of the application process.
When creating an ID through the SEISS service, the taxpayer is asked to verify their identity by providing details from their driving licence photocard or their UK passport. Taxpayers without either of these documents will be asked for a piece of financial information, for example, the date they set up a mobile phone contract.
When a government gateway ID is created as part of the SEISS service there is no requirement for an authentication code (PIN) to be sent in the post.
Taxpayers who need to create a government gateway ID to claim an SEISS grant are advised to do so through the SEISS service, rather than through any other route on gov.uk, to ensure the correct type of ID is set up and to avoid the need for an authentication code in the post.
How to request a review of entitlement
Taxpayers may wish to request a review of their entitlement to an SEISS grant because:
- HMRC says they are not eligible and they wish to dispute their SEISS eligibility status, or
- they disagree with the amount of the grant calculated by HMRC and wish to dispute the SEISS award amount. The taxpayer can only claim the amount of grant calculated by HMRC; there is no option in the application process to claim a higher or lower amount.
A taxpayer or their agent can ask for a review of SEISS eligibility status or the amount of the grant by contacting HMRC on 0800 024 1222. (The online forms are no longer in use).
The following information will need to be provided:
- the grant claim reference;
- the taxpayer’s national insurance number;
- the taxpayer’s UTR; and
- details about why they think the decision on eligibility or the amount of the grant is wrong.
HMRC’s guidance should be checked before requesting a review.
If the taxpayer is not satisfied with the outcome of a review they, or their agent, should follow HMRC’s complaints process. There is no right to make a formal appeal – decisions on the award of a grant are not decisions on a tax matter that can be appealed to the tax tribunals.
Grants overclaimed
Taxpayers must notify HMRC if they have claimed a grant to which they are not entitled. This must be done within 90 days of Finance Act 2020 gaining Royal Assent (so by( 20 October 2020) or 90 days of receipt of the grant, whichever is the later.
HMRC has published guidance on how to repay overclaimed SEISS grants and a factsheet on how the penalty rules apply.
The penalty regime is based on the usual failure-to-notify penalties with an additional provision which means that if the taxpayer knew that they were not entitled to the grant at the time when they received it, the overpayment must be notified or repayment made in full by the end of the notification period. Any failure arising from this additional provision will be treated as deliberate and concealed. Failure-to-notify penalties could be as much as the entire amount overclaimed.
HMRC may issue assessments to recover overclaimed grants. If that does not occur and monies were not otherwise repaid previously then the overclaimed amount must be reported on the taxpayer’s self assessment tax return and tax paid on time.
The factsheets do not mention that error penalties apply if a taxpayer makes a mistake when putting the grant figures on their tax return.
For SEISS grants the key risks affecting entitlement are:
- the trade was not adversely affected by coronavirus and for the third and subsequent grants, the impact on the trade does not satisfy the additional tests;
- the trade did not continue, for the first three grants in the tax year 2019/20 and for the fourth and fifth grants in 2019/20 and 2020/21. For example, this might be because the business was incorporated; or
- there was no intention to continue to trade.
The repayment process also allows taxpayers to voluntarily repay some or all of their grant.
Changes to tax returns
The first three grants were based on tax returns filed up to 23 April 2020 but no account was taken of any amendments, assessments or contract settlements made after 18:00 on 26 March 2020. Changes made after this date are disregarded for the first three grants.
For grants four and five HMRC will base its calculations on the tax return data for 2016/17 to 2019/20 held in its systems on 2 March 2021. All 2016/17 to 2019/20 tax returns filed by 2 March 2021 will be taken into account, as will any amendments, assessments or contract settlements made by that date.
A new requirement which has been introduced for grant four and is expected to apply to grant five requires careful attention. Changes to tax returns for any of the relevant tax years which are made after 2 March 2021 and which would reduce the amount of the grant or would cause the taxpayer to be no longer be eligible must be notified to HMRC and the appropriate amount of grant repaid, subject to a deminimis of £100.
SEISS grants are trading income
SEISS grants were taxable in the 2020/21 tax year (para 3(3), Sch 16, Finance Act 2020), irrespective of the accounting treatment or basis periods. Following the extension of the scheme to provide a fourth and fifth grant, the tax treatment needs to change and a measure in Finance Bill 2021 will ensure that grants are taxed in the tax year in which they are received, irrespective of accounting treatment or basis periods.
Finance Act 2020 ensures that SEISS grants are treated as trading income when calculating trading profits or losses. It follows that SEISS grants should be included as income when considering whether to reduce payments on account and are trading income for pension contribution purposes.
There are separate boxes in the self-employment and partnership sections of the 2020/21 and 2021/22 self assessment tax returns for reporting the grants. HMRC is exploring options for pre-populating returns with the amount of grant claimed and for providing details to agents.
Role of agents
Agents can request reviews of not eligible cases and cases where the amount of the grant is believed to be incorrect. HMRC has not been able to give agents access to make claims on behalf of clients.
Groups that miss out on SEISS
- Started self-employment or joined a partnership since 5 April 2020.
- Self-employment or partnership income of more than £50,000.
- Trades incorporated since 5 April 2020.
- Rely on income from property including furnished holiday lettings.
- Income from employment, property or other sources which is more than the self-employment or partnership income, breaching the 50% rules.
- Earnings reduced because of parental leave or illness in base period.
- Didn’t file their 2018/19 self assessment return by 23 April 2020 (grants one to three) or their 2019/20 return by 2 March 2021 (grants four and five).
Digitally excluded
Those who are digitally excluded and unable to claim online can make claims by phoning HMRC’s SEISS helpline.
The HMRC adviser will talk the taxpayer through the calculation over the phone when the claim is made; the adviser has access to the same screens and calculation shown to taxpayers claiming online.
The HMRC adviser can go back to the calculation after the claim has been submitted and, on request, will send a printout of the calculation and the claim to the taxpayer.
Legislation
The legislation that enacts the SEISS is directions made under Sections 71 and 76 of the Coronavirus Act 2020.
Help and support
HMRC
The key function of HMRC's SEISS helpline is to provide support to those unable to make claims online. The helpline is available for other SEISS related queries, but demand is likely to be high and it should be used only where it has not been possible to resolve queries or request a review using the online systems and guidance.
HMRC has asked that webchat be used in preference to phoning, to help it manage demand.