This scheme does not apply to employees and employers. They have their own (CJRS) scheme. Similarly, directors of limited companies are not self employed; they are employees.
Find coronavirus financial support for your business at Gov.uk.
SEISS fifth grants (updated 6 July 2021)
Details of the fifth, and final, grant under the Self-Employment Income Support Scheme (SEISS) were updated by HMRC on 6 July.
HMRC say that they will contact eligible self-employed people from mid-July and give them an individual date from when the claims portal will be open to them. HMRC say that they will provide more details by email, letter or within the online service.
The online service to claim the fifth grant will be available from late July 2021 and claims must be made on or before 30 September 2021.
The fifth grant is calculated differently from the first four grants.
If their turnover has reduced by 30% or more, the grant will be worked out at 80% of 3 months’ average trading profits and capped at £7,500.
If their turnover has reduced by less than 30%, the grant will be worked out at 30% of 3 months’ average trading profits and capped at £2,850.
In most cases, the self-employed will need to provide two turnover amounts when making their claim. HMRC will use these amounts to work out the amount of the grant.
The effected self employed will have to work out their turnover for a 12-month period that starts on any date between 1 April 2020 and 6 April 2020 i.e. the year ended on 31 March or 6 April 2021.
They will also have to work out their turnover from a pre-Covid-19 year that represents normal trading. This would be either 2019-20 or 2018-19 to use as a reference year when determining if their business turnover has reduced. They will need to have both figures ready when making your fifth grant claim.
For most self employed, the reference year will be their turnover for 2019/20. However, if 2019/20 was an unusually low turnover year, the reference year chosen should be that for 2018/19, assuming this was higher than 2019-20 and the person was trading in the earlier tax year.
Individuals will therefore have to ignore accounting periods which do not end between 31 March and 5 April. HMRC require turnover amounts that fit almost exactly with the tax year, 2020/21, to 5 April 2021.
If they started self-employment or became a business partner in 2019/20, and they hadn’t traded previously at any time between 6 April 2016 and 5 April 2019, they will not need to provide the information in the previous paragraph.
If they started or ceased a business in 2020 to 2021 then they should include the turnover received between April 2020 and April 2021, even if this covers less than 12 months.
The turnover amounts must be the aggregate amounts from all the individual’s self employment businesses in the two years.
Turnover includes takings, fees, sales or money earned or received by the business.
Turnover does not include anything reported as any other income on their Tax Return. Therefore, turnover does not include any coronavirus (Covid-19) support payments e.g. previous SEISS grants, Eat Out to Help Out payments, local authority or devolved administration grants
If the self-employed individual are currently trading but have reduced demand, they will have to keep any evidence that their business has had reduced activity, capacity or demand due to COVID-19 at the time they make their claim. This evidence may include business accounts showing the reduction in activity compared to previous years; records showing reduced or cancelled contracts or appointments or a record of dates where they had reduced demand or capacity due to government restrictions.
If the business is temporarily unable to trade due to COVID-19, they must keep evidence of the inability to trade e.g. a record of dates where they had to close due to government restrictions, NHS testing and tracing communications if they had to self-isolate in-line with NHS guidelines and were unable to work from home or a letter or email from the NHS asking them to shield, test results if they were diagnosed with COVID-19 or letters, emails etc from their child’s school with information on closures or reduced hours.
SEISS fourth grants (updated 3 March 2021)
Details of the fourth Self Employed Income Support (SEISS) grant were announced on 3 March, the date of UK Budget. The self-employed will be eligible so long as they filed their Tax Return by midnight on 2 March 2021
The fourth grant covers the months of February, March and April 2021. The fourth self-employment support grant will be available from late April, expected to be from 22 April 2021. This is a significant delay to the claims process compared to the expected early February claim’s date.
The fourth grants takes into account the profits/losses on the 2019/20 Tax Return. This is the case, both for eligibility and in calculation of the amount of the grant. This will mean that some newly self-employed persons, who started up in 2019/20 and who were excluded from the first three grants, will now be eligible to claim. The fourth grant will exclude not only those who are no longer trading but also some who had little or no profit compared to other income in the tax year 2019/20.
The first three grants were based on profits for the three tax years from 2016-17 to 2018-19. The fourth and fifth grants will also take into business profit for 2019-20. The grants will be calculated based on up to four tax years from 2016-17 to 2019-20. If trading hasn’t continued through all four tax years, only the most recent continuous two or three tax years with trading income are used in determining both eligibility and amount.
Eligibility, under the third and fourth grants, will depend on whether the person suffered a significant reduction in trading profits in a basis period in which the qualifying period falls because of reduced activity, capacity, demand or temporarily unable to trade in the qualifying period due to coronavirus. It will continue to be worth up to 80% of three months' average trading profits, capped at £7,500.
What does 'business adversely affected' mean?
It includes not being able to work because shielding, self-isolating, sick leave or having care responsibilities, scaling down or temporarily stopping trading due to interrupted supply chains, fewer or no customers, staff unable to work or one or more contracts have been cancelled and the business tried to replace the lost work because of coronavirus. If the above arises because the person's isolation or caring responsibilities due to arrival in the UK then they are not valid circumstances for claiming the SEISS.
What is a 'basis period'?
These are the quarters to which the SEISS relates e.g. 1 November 2020 to 29 January 2021 and 1 February to 30 April 2021. There must be a significant reduction in trading profits in both the basis period of the claim and also in the accounting period (year) as a whole i.e. not just the quarter of the claim.
What is a 'significant reduction'?
HMRC and the Treasury will not provide any specific definition of 'significant'”, other than to say that it must be an honest assessment. It appears that a 30% reduction is definitely significant, based on the 5th SEISS grant criteria. It may also be argued that a smaller reduction could also be a significant reduction.
The percentage reduction use should be by comparison with what would otherwise have reasonably been expected i.e. what profits the business could reasonable have expected if not for the Coronavirus pandemic.
Claims for the fourth SEISS grant must be made by midnight of 31 May 2021.
The amount of the fourth grant is determined by HMRC. The amount could be higher or lower than previous grants as profits/losses of 2019/20 will be use in the calculation for the first time in working out the average profits.
HMRC has the power to raise assessments to demand overclaimed SEISS grants. A person should include any wrongly claimed SEISS grants in their Tax Return for 2020/21 and therefore repayment the amount overclaimed, possibly with hindsight when reviewing their impact over the whole accounting period.
Entitlement conditions
In order to qualify for the fourth grant, there are a number of key conditions which must be met. The taxpayer must:
Carry on a trade that has been adversely affected by circumstances arising from Coronavirus.
Have a significant reduction in trading profits due to reduced self-employed income (and not just increased costs)
The reduced business activity, capacity, demand or inability to trade is due to coronavirus
Have submitted tax returns, before 3 March 2021, for all relevant years
Have traded in both 2019-20 and 2020-21
Intend to continue to carry on a trade in 2021-22
Have trading profits of £50,000 or less which are at least equal to non-trading income. This test will first be applied to 2019-20. If the condition is not met in that year, HMRC will look at the overall position in up to four previous tax years.
SEISS grants received must be declared on self-assessment returns separately from normal business turnover. All the SEISS grants are taxable. The first three grants are taxed in 2020-21. The fourth and fifth grants will be taxed in 2021/22, even though most of the qualifying three months arise in 2021/22.
HMRC has repeatedly stated that all SEISS grant claims will be checked. They will focus principally on the entitlement declaration made by individuals. HMRC is expected to automate their checks by comparing grant claims with turnover and profits on their Tax Returns for 2020/21, and eventually with 2021/22 tax returns.
Self-employed to receive a third and fourth grant (updated 30 November 2020)
The SEISS grant is calculated every three months.
The second SEISS grant closed for applications on 19 October 2020.
Applications for a third SEISS grant, for the months period of 1 November 2020 to 31 January 2021, will open on 30 November 2020 and close at midnight on Friday 29 January 2021.
The fourth SEISS grant is payable for the three months of February to April 2021. The grant should have been open for claims on February 2021, but has been delayed until after 3 March 2021, Budget Day.
In May 2020, the self employed were initially entitled to claim 80% of their average quarterly profits based on the last three tax years with the grant worth up to £7,500. This reduced to 70% on the second claim in August 2020, with the grant worth up to £6,570. The third grant will now return to 80% again and be worth up to £7,500 (#).
(#) The first grant, for November 2020 to January 2021, was originally based on 20% of average monthly profits and was worth up to £1,875. On 22 October 2020, the rate and amount were doubled to 40% and £3,750 respectively. On 2 November 2020, the level of the third SEISS grant was boosted to 80% of average monthly profits for the month of November only and therefore the third grant is capped at £5,160 with a 55% third grant. On 5 November, the third SEISS grant was boosted to a full 80% of average monthly profits for the whole of the three months.
There are tougher criteria for the third and fourth SEISS grants.
HMRC’s guidance states that HMRC is expecting an ‘honest assessment’ about whether or not their business will suffer a 'significant reduction' in trading profits due to reduced business activity, capacity or demand or inability to trade due to coronavirus and that claimants will need to keep evidence to support this.
HMRC say that it cannot make the decision for an individual business owner as to what constitutes a ‘significant reduction in trading' because of individual and wider business circumstances that the claimant will need to consider. See examples below.
Taxpayers with a 31 March or 5 April accounting date will be expected to disclose a significant reduction in trading profits then they file their 2020/21 tax return.
The claimant must have traded in both 2018/19 and 2019/20 and intend to continue to trade and have a ‘reasonably believe’ there will be a significant reduction in their business trading profits caused by Coronavirus.
The significant reduction in trading profits test is to be applied to the accounting year as a whole. Therefore, a person having to self-isolate for 14 days, due to quarantine rules, with no other impact on their business would not be eligible to claim the third grant. This is because the reduced demand is due purely to self-isolation for a relatively short period of time. The significant reduction in trading profits test applies to the accounting year as a whole and not just for one to three months.
The new third and fourth grants are only available to self-employed people who were eligible for the first two grants, and are either (i) 'actively trading but impacted by reduced demand due to coronavirus' or (ii) 'were previously trading but temporarily unable to do so due to coronavirus.'
These two conditions differ slightly from the previous two grants where you just had to be 'adversely affected by coronavirus'.
The HMRC criteria for claiming the third and fourth grant are slightly different to the first two grant claim criteria:
The trader must have been eligible for the previous two SEISS grants, even if they did not apply for them.
If the trader is not currently trading then there must be an intention to restart before April 2021
The trader has had reduced activity, capacity, demand or temporarily unable to trade in qualifying period (rather than just 'adversely affected' as with the first two grants) compared with what could reasonably have been expected but for the adverse effect of coronavirus.
The trader has not ceased permanently at the date of the claim and perhaps only temporarily stopped trading due to the Coronavirus.
The above test focuses on 'reduced demand' i.e. sales income. It does not consider 'higher costs' as a valid reason to claim e.g. having to purchase masks, cleaning and other protection measures.
Examples of businesses that can and cannot claim due to significant reduction in trading
A cafe owner who has fewer customers due to government restrictions on households mixing, which reduces her takings and reasonably believes this will significantly reduce her trading profits is eligible to claim.
In contrast, a café owner who increases her prices and believes her trading profits will not reduce significantly, is not eligible to claim the third grant.
A builder with coronavirus symptoms who self isolates for five days before receiving a negative test, is unable to work from home but is able to rearrange his contracts. He does not believe there will be a significant reduction in his trading profits, and is not eligible to claim the third grant.
An electrician is still trading but has had increased costs due to buying masks, cleaning supplies and screens is also not eligible because increased costs were the only impact on the business and it has not lost customers.
A dentist returns from a holiday abroad and has to self-isolate for 14 days due to quarantine rules. As this is the only impact on her business, she is not eligible to claim the third grant, because reduced demand due to self-isolation after foreign travel is not included in the eligibility criteria.
Applicants will now have to declare themselves that either they are currently trading, but impacted by reduced demand due to coronavirus, or have been trading but temporarily unable to do so due to coronavirus.
No details have yet been released concerning the fourth SEISS grant.
It is well known that many individuals have been, and continue to be, excluded from making a grant claim. These including the newly self-employed i.e. within 2019-20 and afterwards, high-earning self-employed (profits over £50,000) and the self-employed who derive more than half of their income from other sources, e.g. from part-time or full-time employment.
By the time the fourth grant is payable, it could be almost two tax years, to 5 April 2019, since the trading results of the trader were included in the calculated profits. If a trader prepared annual accounts to say 30 April 2018, forming part of the tax year 2018-19, then it could be nearer to three years of profits that have been ignored when calculating the relevant income for the grant. We will have to see if the Chancellor will allow profits from 2019/20 to be included in the averaging calculation.
HMRC should make grant payments within six days.
Traders may also consider applying for Universal Credit which can be received in addition to the SEISS grants.
HMRC target self employed who have closed their business (16 October 2020)
HMRC has started to contact self-employed business owners who applied for and received a SEISS grant. HMRC are asking them to confirm whether or not they are still trading.
If they have stopped trading, HMRC want to check whether they were eligible for the grant and may ask for the grant to be repaid.
People who receive letters from HMRC, and are still continuing to trade, will need to reply to HMRC’s request. They will be asked to provide evidence that they are still trading and in business.
There will be people who applied for the SEISS grant that had every intention to continue trading when making the application. However, due to many factors including financial, economic, legal and health reasons may have had to cease trading. This does not mean that they were not eligible for the grant.
People who received a grant before 22 July 2020 must tell HMRC by 20 November 2020 and those who received a grant on or after 22 July 2020 must tell HMRC within 90 days of receiving the grant. If the self-employed do not tell HMRC on time, they may receive a penalty charge.
One of the criteria in applying for the SEISS grant was that the person intended to continue to trade through coronavirus or would restart their business once they were able to reopen.
HMRC are targeting individuals who have permanently closed their business during the months that they received grants for and may therefore not be eligible for all or part of the grant.
HMRC are trying to target individuals who erroneously or fraudulently made a claim for the SEISS grant. Individuals can respond to HMRC by using their website.
Self-employed to receive a second grant of 70% of business profits in August 2020
(updated 11 August 2020)
The scheme has been extended. The government has announced that the self-employed will receive another grant, to cover an extra 3 month period (1 June to 31 August), if their business is still affected by Coronavirus.
If you were eligible for the first grant and can confirm to HMRC that your business has been adversely affected on or after 14 July 2020, you’ll be able to make a claim for a second and final grant from 17 August 2020.
The eligibility criteria for the grant will be the same as the original grant. However, rather than receiving 80% of average monthly profits, over the relevant tax years 2016/17 to 2018/19, the grant will be reduced to 70% of average profits.
The maximum amount will be £2,190 pm, rather than the original grant of £2,500 pm, for the three months. Applications for the second and final grant will open in August.
Businesses do not have to claim for the first grant in order to receive the second grant, e.g. if the business has only recently been affected by Coronavirus.
See the bottom of this article for practical details of how to claim.
Introduction
The government announced a support package for self-employed individuals and partnership businesses that have suffered a loss of earnings due to COVID-19.
Eligible individuals will receive a grant of up to 80% of their average monthly trading profits, capped at £2,500 pm. Initially the scheme will run for a 3 month period.
The scheme will not benefit all self-employed people. Those who started to trade in the tax year 2019/20, those who had profits in excess of £50,000 pa and those who had other taxable income e.g. employment income, substantial dividends or rental income that exceeds more than 50% of their total taxable income will not be eligible.
The scheme will also not benefit directors, who pay themselves a mixture of salary and dividends. However, they may benefit from the Coronavirus Job Retention Scheme if they are paid a salary through a PAYE payroll scheme.
Initially, the grant will cover a 3 month period (1 March to 31 May). HMRC will pay the grant directly into the individual’s bank account as a single instalment in June 2020. In the interim period, the self-employed will need to find other ways to pay their bills using other announced support measures. HMRC contacted those taxpayers who were eligible for the SEISS grant in early May.
The self employed were invited to apply for the grant online through an online portal which opened on 13 May. They were able to claim over the week starting on 13 May to 18 May 2020 with each person having their own claim start day.
The self employed have to confirm to HMRC that their business has been 'adversely' affected by the coronavirus. HMRC will use information they already hold on eligible self-employed taxpayers.
Any grants received will be form part of the self-employed individual’s taxable income and as a result would need to be included on their Self Assessment tax returns. The grant would also need to be included as taxable income on Tax Credit claim forms.
What is the support available due to the Covid-19 impact to those who are self-employed?
Those who are self-employed will get a taxable grant worth 80% of their average monthly taxable profits over the past three years. The grant will be up to £2,500 pm. It is the same capped amount of income as has been announced for furloughed employees.
HMRC guidance states that self-employed trading profits must also be less than £50,000 and that more than half of your income must come from self-employment to be eligible for the grant.
This is determined by at least one of the following conditions being true:
taxable profits in 2018-19 were less than £50,000 and those profits represented more than half of total taxable income in that year,
average taxable trading profits in 2016-17, 2017-18 and 2018-19 were less than £50,000 and those profits represented more than half of total taxable income in that same tax period
For those that started to trade part way through the period between 2016-17 and 2018-19 then the test will apply to the years for which returns were filed.
What are taxable profits?
HMRC has confirmed that it will use the taxable profits figures from the Self Assessment Tax Return. It will not use the accounting profits shown within Financial Statements as these often need changing for taxation rules.
HMRC will take the trading income (turnover) and then deduct allowable business expenses and capital allowances from capital equipment expenditure.
Taxable profits will also be calculated after claiming any flat rate expenses, the £1,000 trading allowance (if applicable) and any capital allowance claims. Profits will be before deducting the income tax personal allowance.
If trading losses brought forward are used in any of the relevant three tax years, 2016-17 to 2018-19, to reduce trading profits, HMRC will ignore the loss relief claim. Therefore, an individual would still receive the grant even if they did not pay tax on net profits after deduction of losses brought forward.
However, if a trading loss was made during 2016/17, 2017/18 or 2018/19, then it will reduce the average trading taxable profits and therefore the grant.
Most self-employed individuals should be able to find their relevant taxable profits on the face of their HMRC tax calculation or self employment pages of their Tax Return.
Are there any conditions to claim this support scheme?
Yes. The self-employed can apply for the scheme if they:
have submitted their Self Assessment tax return for the tax year 2018-19
traded in the tax year 2019-20
are trading when they apply, or would be except for Covid-19
intend to continue to trade in the tax year 2020-21
have lost trading profits due to Covid-19
In addition to above, they must also satisfy the £50,000 profit limit test and other rules noted in section above.
Are the recently registered self-employed who have not filed any tax return yet (i.e. 2019-20 being first return) eligible for this support?
No. According to the Treasury, it is very difficult to assess the amount of the benefit for recently registered self-employed people. They may have to look at the alternative financial support i.e. Universal Credit or Employment and Support Allowance.
Can the self-employed amend the already submitted returns?
To avoid the abuse of the scheme, HMRC will use data on the 2018-19 tax return already submitted.
Can a director of a company claim this grant?
No, not under the self-employment scheme. A director of their own company who is paid through PAYE may be eligible to get support using the Job Retention Scheme. More detail on the position of director-shareholders is expected to be announced.
Does this grant need to be included in the existing tax credit claims in July 2020 declaration?
Yes, this is a taxable grant and it will need to be included as income for the existing tax credit claim.
Making a claim under the Self-Employment Income Support Scheme
On 4 May, HMRC announced that the self-employed cannot ask their accountant to make the claim on their behalf using the accountant’s agent account with HMRC.
Instead, self-employed clients will have to use their own Government Gateway account. Therefore, the self-employed must set up an account with HMRC as soon as possible to be able to make a claim.
Check if you are eligible to claim
You can check if you can claim a grant through the Self-Employment Income Support Scheme. You can use the HMRC online tool to find out if you are eligible to make a claim.
You will need your Self Assessment 10-digit Unique Taxpayer Reference (UTR) number and your National Insurance number. You will receive an immediate answer.
When you make your claim
The online service opened to make a claim from 13 May 2020.
You’ll only need your:
Self Assessment 10-digit UTR
National Insurance number
Government Gateway user ID and password
Bank account number and sort code you want the grant paid into
You will have to confirm to HMRC that your business has been adversely affected by coronavirus.
A business could be adversely affected by coronavirus, for example, if you are unable to work because you:
are shielding
are self-isolating
are on sick leave because of coronavirus
have caring responsibilities because of coronavirus
you have had to scale down or temporarily stop trading because:
(a) your supply chain has been interrupted
(b) you have fewer or no customers or clients
(c) your staff are unable to come in to work
Once you have made a claim then you will need to report the grant:
on your Self Assessment tax return
as self-employed income for any Universal Credit claims
as self-employed income and that you’re working 16 hours a week for any tax credits claims.