Self-employment income support scheme (SEISS)
- Who will be eligible
- Calculation of trading profits and non-trading income
- Amount of the grant
- How to apply
- Extension to SEISS
During the coronavirus (COVID-19) pandemic, self-employed individuals and members of partnerships can claim a taxable grant worth 80% of their average trading profits from the last three tax years, ie 2016/17, 2017/18 and 2018/19. This was for an initial period of three months and was subject to a maximum amount of £7,500 in total for these three months. This first scheme closed on 13 July 2020. There will be a second and final grant in August 2020, see below for details of extension to the scheme.
The Government guidance states that the grant is only available where income has been lost due to the coronavirus outbreak. This will be confirmed to HMRC by the individual and will be checked by HMRC using a normal risk-based approach.
The grant will be taxable and subject to national insurance and will also be recognised as income for the purposes of universal credit and tax credits, but will not have to be repaid. Individuals can carry on working or take on other employment and still receive the grant.
Who will be eligible?
In order to be eligible for the grant, claimants will have to have filed a tax return for 2018/19, have continued to trade into the tax year 2019/20, intend to continue to trade into the tax year 2020/21 and be trading when the application is made, or would have been trading had the coronavirus outbreak not occurred. Claimants also must have lost trading profits due to coronavirus.
The adverse impact on the business could be because the claimant was self-isolating, shielding, caring for others or on sick leave. Alternatively, it may be because the business could not operate due to supply chain issues, no customers or available staff or the business had to buy protective equipment so it could trade following social distancing rules.
Trading profits need to be no more than £50,000 and at least equal to non-trading income.
Eligibility will firstly be assessed based on the 2018/19 tax year, and if that year does not qualify, then the three tax years 2018/19, 2017/18 and 2016/17 will be reviewed.
|2016/17||2017/18||2018/19||Average for the three tax years||Total|
|Trading profit / (loss)||50,000||50,000||(10,000)||30,000||90,000|
|Eligibility using the tax year 2018/19 only||N/A||N/A||No||N/A||No|
|Eligibility using the three tax years||N/A||N/A||N/A||Yes||Yes|
Even though a loss was made in 2018/19, the business is eligible to claim SEISS because the average trading profit for the last three years of £30,000 was not more than £50,000, and the sum of the trading profits for the three tax years (£90,000) was at least equal to the sum of the non-trading income of £45,000 for those years.
HMRC has launched an online tool that allows potential claimants to check their eligibility. If HMRC advises that the taxpayer is not eligible for SEISS, the taxpayer can request a review and this can be dealt with by the taxpayer’s agent on their behalf.
Parents, including those who have adopted, who took time out of trading to care for their children within the first 12 months of the birth of the child or the adoption placement can 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. Further detailed guidance for self-employed parents will be published in July.
The Low Incomes Tax Reform Group (LITRG) has raised concerns in a press release that some self-employed people may not have received correspondence from HMRC as they are self-isolating at a different address to their usual one. Such individuals should check their eligibility through the online tool.
Any individuals working through their own companies and paying themselves a salary and dividend will not be eligible for this grant, but may be able to get support through the coronavirus job retention scheme. This may however be a limited amount.
Self-employed individuals who have recently incorporated may not be eligible for relief under SEISS as they are not continuing to trade as self-employed. This issue was raised by the LITRG in a recent press release.
No three-year trading history
If the business has not been trading for the three years 2018/19, 2017/18 and 2016/17, average trading profit will be based on continuous periods of self-employment, which will be either:
- the tax years 2017/18 and 2018/19, or
- the tax year 2018/19 only, even if the individual was self-employed in the tax year 2016/2017
Where a tax return had not been filed for 2018/19, there was an additional four-week window in which it could be filed, ie before 23 April 2020. If a tax return for 2018/19 was not filed by that date, a claim cannot be made for SEISS (although see below for individuals within the disguised remuneration loan charge rules).
An individual can apply for universal credit whilst waiting for the grant to be paid, but any grant will be included in income and may affect the amount of universal credit available.
Where a farmer claims farmers’ averaging (see the Averaging of profit guidance note) eligibility to the grant and the amount of the grant will be calculated using profit before the impact of averaging claims.
Individuals within the disguised remuneration loan charge rules (see the Disguised remuneration ― overview guidance note) are required to file their 2018/19 tax return by 30 September 2020 rather than 23 April 2020. However, they can still claim under the SEISS, but eligibility and average trading profits will be based on:
- the average of the tax years 2016/2017 and 2017/2018, or
- just the tax year 2017/18 where the individual was not self-employed in 2016/17
HMRC has issued further guidance for specific circumstances that could affect eligibility to claim ― see How different circumstances affect the Self-Employment Income Support Scheme.
Calculation of trading profits and non-trading income
HMRC has issued guidance on the calculation of trading profit and non-trading income.
Trading profits will be calculated by taking total trading income and deducting allowable business expenses and capital amounts, these would include:
- office costs
- travel costs
- clothing expenses, eg uniforms
- staff costs
- stock and raw materials
- financial costs such as insurance and bank charges
- business premises costs
- advertising or marketing
- training courses
- the trading allowance (see the Trading allowance guidance note)
- capital allowances (see the Capital allowances ― overview guidance note)
- qualifying care relief, and
- flat rate expenses (see the Fixed rate deductions for expenses of unincorporated businesses guidance note)
No amounts will be deducted for losses from previous years or for an individual’s personal allowance.
HMRC has stated that the trading profits calculation will be done by taking the amount shown as ‘Total taxable profits from this business’ from the tax return (box 76) and adding back any losses brought forward. For a partnership this will be the partner’s share of total taxable profits from the partnership’s business with brought forward losses again added back.
Where there is more than one trade, all profits and losses from the trades will be added together.
Non-trading income will comprise income from:
- property income
- savings income
- pension income
- overseas income
- miscellaneous income, including taxable social security income
Amount of the grant
The amount of the SEISS payment will be based on average trading profits, the calculation of which will depend on the period of continuous trading.
If trading has been carried out in 2016/17, 2017/18 and 2018/19, all trading profits and losses for each of the years will be added together and divided by three. If the trade has only been running continuously for 2017/18 and 2018/19, the average for those two years will be taken. If the trade was not carried on during 2017/18, the trading profits of 2018/19 will be used.
The first grant was 80% of the average trading profit, divided by 12 and multiplied by three, to give the three-month amount, but capped at £7,500, and paid out in a single instalment. The second grant is 70% of average trading profits, again paid out in a single instalment and covering three months’ worth of profits. The second grant will be capped at £6,570.
An average trading profit of £42,000 was made over the three tax years, the amount of the grant will be:
|Average trading profit||42,000|
|Divide by 12||3,500|
|Multiply by 3||10,500|
|Work out 80%||8,400|
As the maximum amount payable for this grant is £7,500, that is the amount that will be received.
How to apply
An online application service is available. This application needs to be completed by the taxpayer and not the taxpayer’s agent. If the claim is approved, payment will be made within six working days.
HMRC will use the information on the claimant’s tax returns to work out the grant amount.
If the taxpayer does not agree with the grant amount that HMRC advises that they are due, the taxpayer can ask for a review, but they should ensure that the claim is completed first and request the review afterwards. The review can be dealt with by the taxpayer’s agent on their behalf.
All records supporting the claim must be retained, and the grant will need to be reported on the claimant’s tax return and any claims for Universal Credit.
The Government has launched a ‘support finder’ tool to help businesses and self-employed people to determine what financial support is available.
The Treasury Direction setting out the legal framework for the scheme was issued on 1 May 2020.
If an application for SEISS is made in error or an overpayment has been made, the taxpayer should inform HMRC and make a repayment through the Government portal by the later of 20 October 2020 or 90 days after the grant was received. There may be penalties if a taxpayer does not tell HMRC. The Government has issued a factsheet with further details of the assessment and penalty process.
Extension to SEISS
SEISS is to be extended and a second and final grant will be available in August 2020. This taxable grant will be worth 70% of average trading profits, again paid out in a single instalment and covering three months’ worth of profits. The second grant will be capped at £6,570.
The eligibility criteria for the second grant will be the same as for the first grant. Claimants do not need to have claimed the first grant to claim the second grant, but will have to confirm that their business has been adversely affected on or after 14 July 2020.
The online claimant service for the second tranche of the grant will open on 17 August 2020.