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Open until 30th September 2021

The latest Self-employed grant is now open for applications, but it’s now getting much more complicated to claim. Under SEISS-5, most self-employed taxpayers may well need to provide two different turnover figures from their business as part of their application.

The portal to apply for the fifth self-employed income support scheme (SEISS) grant opened on 29th July, but not everyone can apply at once. HMRC has contacted every self-employed taxpayer (by email or letter) who it believes may be eligible to apply for the fifth and last SEISS grant, giving them a personal start date from which they can apply.

Taxpayers should not attempt to apply before their personal start date as their claim will not be processed. This staggered start is to prevent every eligible taxpayer applying on the same day and crashing the system, and to give HMRC time to process all the grant payments due. Taxpayers don’t have to apply for the SEISS grant on the first possible day, as the portal will remain open until 30th September 2021, but the sooner they apply, the quicker the money will arrive.

SEISS-5: Who is eligible?

HMRC have checked taxpayers’ eligibility in advance of opening the claims portal for them, such as whether the 2019/20 tax return was submitted by 2nd March 2021 and the taxpayer must make a declaration in the application that they intend to keep trading in 2021/22.

Also, applicants must state that their trading profits will suffer a ‘significant reduction’ due to the impact of covid-19 in the period between 1st May 2021 and 30th September 2021. There is no actual definition of “significant reduction” and HMRC is not planning to provide one. However, the taxpayer is only required to look forward to estimate their profits in the period ending 30th September 2021. They are not required to re-examine their claim with hindsight after the event.

Providing taxpayers keep all evidence of why they believed profits have reduced (ignoring any covid-related grants received), they will be able to show that their reasonable belief at the time of application was that profits would be reduced. If the taxpayer was eligible for the SEISS-4 grant (or earlier grants) but failed to apply on time they can still apply for the SEISS-5 grant if they meet the other conditions.

SEISS-5: The Turnover Test

To complete the grant application most taxpayers need to submit two different turnover figures, and to help, HMRC has improved its guidance. New traders, who started trading in 2019/20 and didn’t have a (different) self-employed trade in any of the years 2016/17 to 2018/19, don’t need to provide a turnover figure at all, as HMRC already has a figure for 2019/20 from their tax return.

These new traders will get the 80% level of the grant, but because of the complexity of the application process, most will need some help from their accountant to find the required turnover figures. However, although HMRC openly admit that they expect the majority of existing self-employed applicants to approach their accountants for help in completing the application form, they have then contradicted themselves by stating that if an accountant uses their client’s government gateway’s ID and password to apply for the SEISS 5grant this will almost certainly result in the application being blocked.

SEISS-5: What figures do HMRC want?

The required turnover figure is gross sales for all concurrent trades, not profit. It should exclude all Covid-related grants received: SEISS, CJRS, business rates support, and ‘eat out to help out’. These figures are only used to determine which level of grant the taxpayer qualifies for (30% or 80% of average monthly profits), they do not feed into the actual calculation of the grant to be paid. The two turnover figures required are:

  1. Pandemic period 1. This will be approximately the same for everyone. Irrespective of the date the accounts are drawn-up to. The taxpayer must report their turnover for the 12-month trading period ending between 31st March and 5th April 2021
  2. Pandemic period 2. This is the turnover for the accounts reported on the 2019/20 tax return or the 2018/19 return if 2019/20 was unusual. This may well be the same figure as in (1) above; but if the taxpayer uses a different accounting period, it will clearly not cover the same months as correspond to the turnover reported for the pandemic period, hence the need for the two figures

Clear as mud? I thought that might be the case so here’s an example:

William draws up his accounts for his self-employed business to 30st October each year. He will report turnover for the following periods as part of his application for SEISS-5 grant:

Pandemic:       1st April 2020 to 31st March 2021, excluding SEISS grants 1, 2 and 3 received in that year. Reference:       1st November 2018 to 31st October 2019, as reported on his 2019/20 tax return.

A minor tweak has been made for partnerships, in that it’s the partnership turnover as a whole that HMRC wants to compare for the pandemic to reference period 1, which is why a partner is required to report the turnover for the whole partnership business. It’s only when a partner also has another self-employed business should he report just his share of the partnership turnover.

SEISS-5: What will you get?

If the comparison of figures from reference period to pandemic period shows that turnover has decreased by 30% or more, HMRC will calculate the SEISS grant based on 80% of the taxpayer’s average monthly profits for three months capped at £7,500. However, if the turnover between the reference and pandemic periods has decreased by less than 30%, the taxpayer will get a SEISS grant calculated at 30% of average monthly profits for three months capped at £2,850.

But where turnover is broadly the same, no SEISS-5 grant will be paid; so I’s vital that you enter the correct turnover figures relating to the pandemic/reference periods in the right places on the application. HMRC have also made available a YouTube video to talk you through the process,

Tax  Accountant’s view

This latest grant has been made significantly more complex to apply for and when you add to that the embargo on accountants submitting a claim on behalf of their clients, it makes you wonder if HMRC are deliberately trying to put people off from claiming.  Due to libel laws, I cannot tell you what I believe, but I’m assuming you have a pretty good guess!