As part of the Government’s recently introduced extended support package for businesses, it was announced that the Self-Employed Income Support Scheme (SEISS) would return for a third instalment, with eligible individuals able to receive 80% of average trading profits for November, December and January (see our previous blog for more).
However, it has now been confirmed that the eligibility criteria for the third grant has been tightened – see below everything we know so far.
What are the new rules of the scheme?
The Government’s latest announcements indicate that to qualify for the third grant, the business needs to have been not only ‘adversely affected’ as a result of the pandemic, but also:
– To be currently trading, but impacted by reduced demand due to coronavirus; or
– To have been trading but now temporarily unable to do so due to coronavirus
The Government’s latest guidance on checking whether you can claim a grant and how your trading conditions can affect eligibility also now include an additional test, which requires that the taxpayer must:
– Intend to continue to trade; and
– Reasonably believe there will be a significant reduction in their trading profits due to reduced activity, capacity or demand or inability to trade due to coronavirus (during the period of 1 November 2020 to 29 January 2021)
It is our understanding that the above test (to identify whether the business has experienced ‘significantly reduced profits’) will apply to the accounting period as a whole.
For many taxpayers, including those that use a 31 March or 5 April accounting date, the significantly reduced trading profits will be expected to be reported on their 2020/21 tax return. However, some taxpayers, including those that use a 30 April accounting date, will not report the trading results for the relevant period until their 2021/22 tax return.
What does this mean for me?
Understandably, you may have some concerns if you were planning to claim when the scheme opens on 30 November (the scheme will be open for claiming until 29 January 2021).
Things to keep in mind are as follows:
– As the reduction to trading profits applies to the full tax year, those who claim will have to forecast their business’ income to establish their eligibility. For many, this will be almost impossible to do, so therefore HMRC’s guidance indicates that it expects claimants to make an ‘honest assessment’ about whether they reasonably believe that their business’ profits will be significantly reduced. We recommend that you keep a record of the details you considered, the facts available to you at the time and the decision you made so that you can demonstrate that you considered the matter properly and made an honest assessment if you are subsequently challenged by HMRC.
– HMRC has specifically confirmed that a reduction in profits due to increased costs (e.g. for buying protective equipment such as masks) does not count.
– Claims cannot be made where the reduced activity, capacity or demand is due to the fact that the self-employed individual has to self-isolate / care for another person etc.
– The third instalment of the SEISS is calculated in the same way as the first and second grants (it is based on the same tax years, and the £50,000 income cap and 50% of income tests apply as before), so none of the previously excluded groups will qualify.
What to do next
Self-employed individuals who are planning on claiming when the scheme opens on 30 November should carefully consider everything outlined in this blog. HMRC are in the process of investigating fraudulent claims across all of their support packages this year, so great care should be taken when preparing and submitting a claim to avoid a compliance check that could result in penalties. Evidence should also be retained to support decisions made.
For advice tailored to your situation, please speak to your usual PM+M representative. Alternatively, please email us at firstname.lastname@example.org and we’ll direct you to the right person.
This information is correct as of 25 November 2020. This blog is for general guidance only. Recipients should not act upon any of the information provided without seeking specific professional advice tailored to your circumstances, requirements or needs. Please contact PM+M before making any decisions based on any matters relating to this blog.