Guidance on Self-employment Income Support Scheme
Information on the Self-employment Income Support Scheme (SEISS), including information on changes to eligibility criteria and the level of the grant, as well as the application process and requesting reviews.
What you need to know
Who can claim: Self-employed individuals or a member of a partnership (as long as certain eligibility criteria are met, see below). Limited companies and trusts are not entitled to claim.
How much can be claimed: The first grant was calculated as 80% of the average of three months of trading profits, up to a maximum of £7,500. The second grant is calculated as 70%, up to a maximum of £6,570.
The extension announced on 24 September 2020 provides two further grants. The third grant will be calculated as 20% of three months trading profits, up to a maximum of £1,875. The level of the fourth SEISS grant is to be kept under review and will be set in due course.
Average trading profits is based on 2016/17, 2017/18 and 2018/19 with some exceptions for particular circumstances. This will not change for the third and fourth grants.
Subject to eligibility, the second, third and the fourth grants can be claimed even if previous grants were not claimed.
When can claims be made: Applications for the first grant closed on 13 July 2020. Applications for the second grant opened on 17 August 2020 and will close on 19 October 2020. HMRC has not yet provided details about applications for the third and fourth grants.
When will grants be paid: Grants are paid within six working days of the claim being submitted.
Who makes the application: Claims have to made by the taxpayer themselves and cannot be made by agents.
Who does the calculations: HMRC does all the calculations needed for the claims, using the information in the submitted tax returns. The taxpayer does not have to provide any figures.
Is the grant taxable: Yes, the grants are subject to income tax and self-employment national insurance contributions in the 2020/21 tax year. HMRC expects to provide a specific section in the 2020/21 self assessment tax return for the reporting of SEISS grants. It is possible that the fourth grant will be taxable in 2021/22, that has yet to be decided.
Fraudsters are targeting those who might be claiming SEISS grants. To guard against fraud, any emails and SMS messages from HMRC do not include active links. If a taxpayer receives an email or SMS purporting to come from HMRC which includes an active link, that email or SMS is a scam.
First and second grants
Self-employed individuals and members of a partnership are eligible where the taxpayer:
- submitted their self assessment tax return for the tax year 2018/19 by 23 April 2020;
- traded in the tax year 2019/20;
- intends to continue to trade in the tax year 2020/21;
- carries on a trade which has been adversely affected by coronavirus.
HMRC has provided some guidance on the meaning of ‘adversely affected’. This includes being unable to work because the taxpayer is shielding, self-isolating or is on sick leave or has care responsibilities because of coronavirus. It also includes scaling down, temporarily stopping trading or incurring additional costs because:
- the supply chain has been interrupted;
- the business has fewer or no customers;
- staff are unable to work
- one or more of contracts have been cancelled; or
- protective equipment was purchased to comply with social distancing rules.
The lack of any mention of specific, measurable reductions in income is intentional. The taxpayer should keep evidence of the impact on their trade, but there is no link between the amount of the grant and the financial loss. The list is not exhaustive; for example, a business might be adversely affected if it has to write off a bad debt because a customer has ceased trading due to coronavirus.
The scheme specifically allows a claim where the trade has continued, so long as the trade is ‘adversely affected’. During the application process, the taxpayer is asked to confirm that they meet the eligibility criteria, but the importance of the questions may be missed by some and others may worry about them unnecessarily.
HMRC’s guidance was not specific about when a business needs to be adversely affected to qualify for a grant. This has now changed and to qualify for the first grant the business must have been adversely affected before or on 13 July 2020. To qualify for the second grant the business must be adversely affected after 13 July 2020. It is possible to qualify for and claim one grant and not the other. HMRC has published some examples to illustrate this but further clarity is needed.
The taxpayer’s trading profits must also be no more than £50,000 and more than half of their total income for either:
- the tax year 2018/19; or
- the average of the tax years 2016/17, 2017/18, and 2018/19.
The amount of the grant is based on the average trading profits for the relevant years. Examples are available in HMRC’s guidance. Note that the grant is calculated using the trading profits shown on the tax returns; no adjustment is made if the taxpayer traded for only part of a tax year. Amendments to returns made after 26 March 2020 are disregarded.
HMRC has published guidance for those with particular circumstances.
Third and fourth grants
The eligibility criteria for the third and fourth grants are changing; the government intends that only viable businesses are supported and to align the scheme with the Job Support Scheme.
To be eligible for the third and fourth grants, taxpayers must:
- be currently eligible for the SEISS (ie, meet the eligibility criteria for the first and second grants although it is not necessary to have claimed the previous grants),
- be actively trading at the time the grant is claimed and intend to continue to trade, and
- be impacted by reduced demand due to COVID-19 in the qualifying period.
The requirements to be “actively trading” and to be “impacted by reduced demand” are new and HMRC is expected to publish further guidance to clarify the meaning of these terms.
The requirement to be actively trading will mean that businesses that have had to close during the pandemic will not be able to claim if they have not restarted during the qualifying period.
Eligibility for previous grants was conditional on the business being “adversely affected” (as outline above), the Tax Faculty understands that “impacted by reduced demand” is likely to be defined more narrowly.
What time period is covered?
The first grant is available to businesses adversely affected up to 13 July 2020, and the second grant is available to businesses affected on or after 14 July 2020 with the application deadline being 19 October.
The view that the first grant relates to March to May 2020, as mentioned in the original announcement by the Chancellor, has persisted although this aspect of the policy had been dropped by the time the direction was published on 30 April.
HMRC has confirmed to the Tax Faculty, that in relation to the periods covered by SEISS:
- The SEISS grants do not relate to any particular periods or seek to replace lost income over a particular period.
- SEISS is not intended to provide a month-by-month replacement of income.
- SEISS provides a lump sum payment to support eligible self-employed individuals whose businesses have been adversely affected by coronavirus. The sum is calculated by reference to three months’ average trading profits.
- Individuals can receive the full grant under the SEISS while continuing to work as long as their businesses have been adversely affected at the date of claim.
The extension announced on 24 September 2020 provides two further grants. The qualifying period for the third grant runs from 1 November to the date of claim and the qualifying period for the fourth grant is expected to run from 1 February 2021 to the date of that claim. Although HMRC’s factsheet refers to the third grant as covering November to January and the fourth grant February to April this is somewhat misleading and the period during which the eligibility criteria must be met is more meaningful.
How to apply
HMRC did provide an eligibility checker but that has now been withdrawn.
HMRC is yet to provide full details about claiming the third and fourth grants.
Currently the SEISS application portal is open for applications for the second grant and will close on 19 October 2020. Applications for the first grant closed on 13 July 2020. Taxpayers log in to their government gateway account (or select the option to create an account) to complete the application process.
They are presented with a calculation of the amount of the grant and are asked to:
- read and accept the eligibility criteria;
- complete a declaration, including to confirm that the business has been adversely affected by coronavirus; and
- supply the bank account details into which they would like the grant to be paid.
The taxpayer does not need to provide any information about their income – the calculations are all done by HMRC based on the tax returns submitted.
Taxpayers should keep a copy of the calculation and a record of the claim reference number. It is also important to keep evidence that the business has been adversely affected by coronavirus, such as:
- business accounts showing a reduction in turnover;
- confirmation of any coronavirus-related business loans;
- dates the business had to close due to lockdown restrictions; or
- dates the taxpayer or their staff were unable to work due to coronavirus symptoms, shielding or caring responsibilities due to school closures.
HMRC will check the claim and expects to make payments within six working days of the application being submitted.
HMRC is warning taxpayers that they must make the claim themselves. If an agent or adviser attempts to make a claim on behalf of a client this will trigger a fraud alert and the taxpayer will have to contact HMRC. This will cause a significant delay to payment.
Creating a government gateway ID
Taxpayers who already have a government gateway ID which gives access to HMRC’s self assessment services will be able to use that ID when applying for their SEISS grant.
Those who do not have a government gateway ID are prompted to create one as the first step of the application process.
When creating an ID through the SEISS service, the taxpayer is asked to verify their identity by providing details from their driving licence photocard or their UK passport. Taxpayers without either of these documents will be asked for a piece of financial information, for example, the date they set up a mobile phone contract.
When a government gateway ID is created as part of the SEISS service there is no requirement for an authentication code (PIN) to be sent in the post.
Taxpayers who need to create a government gateway ID to claim an SEISS grant are advised to do so through the SEISS service, rather than through any other route on gov.uk, to ensure the correct type of ID is set up and to avoid the need for an authentication code in the post.
How to request a review of entitlement
Taxpayers may wish to request a review of their entitlement to an SEISS grant because:
- HMRC says they are not eligible and they wish to dispute their SEISS eligibility status, or
- they disagree with the amount of the grant calculated by HMRC and wish to dispute the SEISS award amount. The taxpayer can only claim the amount of grant calculated by HMRC; there is no option in the application process to claim a higher or lower amount.
A taxpayer or their agent can ask for a review of SEISS eligibility status or the amount of the grant by contacting HMRC on 0800 024 1222. (The online forms are no longer in use).
The following information will need to be provided:
- the grant claim reference;
- the taxpayer’s national insurance number;
- the taxpayer’s UTR; and
- details about why they think the decision on eligibility or the amount of the grant is wrong.
HMRC’s guidance should be checked before requesting a review.
If the taxpayer is not satisfied with the outcome of a review they, or their agent, should follow HMRC’s complaints process. There is no right to make a formal appeal – decisions on the award of a grant are not decisions on a tax matter that can be appealed to the tax tribunals.
Taxpayers must notify HMRC if they have claimed a grant to which they are not entitled. This must be done within 90 days of Finance Act 2020 gaining Royal Assent (so by 20 October 2020) or 90 days of receipt of the grant, whichever is the later.
The penalty regime is based on the usual failure-to-notify penalties with an additional provision which means that if the taxpayer knew that they were not entitled to the grant at the time when they received it, the overpayment must be notified or repayment made in full by the end of the notification period. Any failure arising from this additional provision will be treated as deliberate and concealed. Failure-to-notify penalties could be as much as the entire amount overclaimed.
HMRC may issue assessments to recover overclaimed grants. If that does not occur and monies were not otherwise repaid previously then the overclaimed amount must be reported on the taxpayer’s self assessment tax return and tax paid on time.
The factsheets do not mention that error penalties apply if a taxpayer makes a mistake when putting the grant figures on their tax return.
For SEISS grants the key risks affecting entitlement are:
- the trade was not adversely affected by coronavirus;
- the trade did not continue in the tax year 2019/20 (eg, because the business was incorporated); or
- there was no intention to continue to trade in the tax year 2020/21.
The repayment process also allows taxpayers to voluntarily repay some or all of their grant.
Role of agents
Agents can request reviews of not eligible cases and cases where the amount of the grant is believed to be incorrect. HMRC has not been able to give agents access to make claims on behalf of clients.
The following groups miss out on SEISS
- Started self-employment or joined a partnership since 5 April 2019.
- Self-employment or partnership income of more than £50,000.
- Trades incorporated since 5 April 2019.
- Rely on income from property including furnished holiday lettings.
- Income from employment, property or other sources which is more than the self-employment or partnership income, breaching the 50%.
- Earnings reduced because of parental leave or illness in base period.
- Didn’t file their 2018/19 self assessment return by 23 April 2020.
Those who are digitally excluded and unable to claim online can make claims by phoning HMRC’s SEISS helpline.
The HMRC adviser will talk the taxpayer through the calculation over the phone when the claim is made; the adviser has access to the same screens and calculation shown to taxpayers claiming online.
The HMRC adviser can go back to the calculation after the claim has been submitted and, on request, will send a printout of the calculation and the claim to the taxpayer.
The legislation that enacts the SEISS is two directions made under Sections 71 and 76 of the Coronavirus Act 2020.
Help and support
The key function of HMRC’s SEISS helpline is to provide support to those unable to make claims online. The helpline is available for other SEISS related queries, but demand is likely to be high and it should be used only where it has not been possible to resolve queries or request a review using the online systems and guidance.
HMRC has asked that webchat be used in preference to phoning, to help it manage demand.
If you are new to Revel and are keen to find out more, please call our consultant Will Bolter FCCA MAAT ATT (our designated COVID-19 response advisor) on 07379 451484 or contact us by email here.