Almost five months after the last round of the Self-Employment Income Support Scheme (SEISS), HMRC is now sending emails, letters or messages within its online service advising those whose tax returns show they may be entitled to claim the fourth SEISS grant when their April when their personal claims window opens.
The window will open in “late April” according to HMRC and will close for all SEISS 4 claims on 1 June 2021.
SEISS has evolved
Coronavirus isn’t alone in having spawned variants. The newest SEISS variant, SEISS 4, covers the period from 1 February 2021 to 30 April 2021 and brings 2019/20 tax returns into account, both for eligibility and in calculation of the amount of the grant. This will open the scheme to some new applicants who started up in 2019/20; it excludes not only those who are no longer trading but also some who had little or no profit relative to other income in 2019/20.
Eligibility is determined by HMRC and only applies to those whose 2019/20 tax returns were submitted before 3 March 2021.
HMRC will test eligibility for 2019/20 in isolation to see if profits are under £50,000 and at least half the relevant income. For those who don’t qualify based on 2019/20 alone, HMRC will then evaluate the four tax years 2016/17, 2017/18, 2018/19 and 2019/20 combined to test if average profits across the four years are under £50,000 and at least half of relevant income.
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.
Amount is also determined by HMRC, and SEISS 4 will again be 80% of three months’ average profits, but it is likely to be different to SEISS 3. The amount of SEISS 4 could be higher or lower than SEISS 3 because 2019/20 profits will be included for the first time in working out average profits.
There is no mechanism to claim a smaller amount – the only option would be to make the claim and voluntarily repay part of it.
Just because HMRC’s historical records may show eligibility does not mean that someone is necessarily entitled to claim. There are two important declarations required:
- Traded as self-employed in 2020/2021 and intending to continue to trade in 2021/2022
- Must have reasonable belief there will be a significant reduction in trading profits due to reduced self-employed income (not just increased costs) because of reduced business activity, capacity, demand or inability to trade due to coronavirus. There are several key terms in this declaration which will be discussed in more detail in a follow-on article next week.
Having a new child affected the 2019/20 tax year?
It may be possible in some limited circumstances for someone to make a claim even if having a new child means they do not meet the eligibility tests based on their 2019/20 tax return. They must have submitted a 2018/19 tax return and meet all other eligibility and entitlement criteria. HMRC advises: “Before making a claim, you must contact us to verify that having a new child has affected your eligibility.”
For these purposes “having a new child” includes being pregnant, giving birth (including a stillbirth after more than 24 weeks of pregnancy) and relates to the six months after giving birth, and caring for a child within 12 months of birth or adoption placement for a claimant who has parental responsibility.
Tax on SEISS payments
All SEISS variants are taxable and class 4 NICable and for SEISS 4 this will be in 2021/22, the year in which the grant is made, even though most of the qualifying three months are not in 2021/22.
SEISS grants received must be declared on self-assessment returns separately from normal business turnover.
Be prepared for HMRC checks
HMRC has repeatedly said all SEISS claims will be checked. The focus of checks will principally be the entitlement declarations claimants make, since HMRC itself is determining eligibility and amount. HMRC can be expected to automate checks to some extent by comparing SEISS claims with turnover and profits on self-assessment tax returns for 2020/21 and eventually with 2021/22 tax returns.