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 third grant was calculated as 80% of the average of three months of trading profits, up to a maximum of £7,500. The first grant was 80% up to a maximum of £7,500, the second grant was 70% up to a maximum of £6,570. The level of the fourth SEISS grant will be announced at the Spring Budget on 3 March 2021
Average trading profits is based on 2016/17, 2017/18 and 2018/19 with some exceptions for particular circumstances.
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: The online claims portal for the third grant closed on 29 January 2021. Details of the fourth grant will be announced at the Spring Budget on 3 March.
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 will provide specific boxes 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. (Find out more)
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.
Webinar on SEISS V3
Caroline Misin, from ICAEW's Tax Faculty, navigates the significant changes to the Self Employment Income Support Scheme for the third grant.
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 changed and to qualify for the first grant the business must have been adversely affected on or before 13 July 2020. To qualify for the second grant the business must be adversely affected after 13 July 2020.
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.
Additional, tighter, eligibility criteria have been introduced for the third grant.
To be eligible for the third grant, taxpayers must meet the eligibility criteria for the first and second grants and also:
- experience reduced activity, capacity or demand or be temporarily unable to trade in the period from 1 November 2020 to 29 January 2021, compared with what could reasonably have been expected but for the adverse effect on the business of coronavirus, and
- the claimant reasonably believes the impact will cause a significant reduction in trading profits for the relevant accounting period, compared with what would otherwise have reasonably been expected as a result of that reduced activity, capacity or demand.
HMRC has published new guidance and examples to help claimants check whether they are eligible.
The significant reduction in trading profits test is applied to the accounting period as a whole. For many taxpayers, for example those that use a 31 March or 5 April accounting date, the significant reduction of trading profits will be expected to appear in the results they report on their 2020/21 tax return. However, some taxpayers, for example those that use a 30 April accounting date, will not report the trading results for the relevant period until their 2021/22 tax return.
This means that claimants will have to forecast their results to establish eligibility and it will be difficult for HMRC to enforce effectively. HMRC’s guidance indicates that it expects claimants to make ‘an honest assessment’ about whether they reasonably believe that their business will have a significant reduction in profits.
HMRC has specifically said that a reduction in profits due to increased costs (such as having to buy masks) does not count for this purpose.
No claim can be made where the reduced activity, capacity or demand is caused solely because the person is required to self-isolate, or care for a person required to self-isolate, as a result of travelling to the UK.
The eligibility criteria may be revised further for the fourth grant.
What time period is covered?
The first grant was available to businesses adversely affected up to 13 July 2020, and the second grant was available to businesses affected on or after 14 July 2020.
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 and updated on 22 October, 2 and 5 November 2020 provides two further grants.
The qualifying period for the third grant runs from 1 November to 29 January 2021 and the qualifying period for the fourth grant is expected to run from 1 February 2021 to 30 April 2021.
Although HMRC refers to the third grant as covering November to January and the fourth grant February to April it is more meaningful to regard these as periods during which the eligibility criteria need to be met.
Given the new ‘significant reduction in trading profits’ test in some cases it may be advisable to delay claiming the third grant until January 2021 when it may be easier to assess whether this test has been met.
How to apply
HMRC did provide an eligibility checker but that has now been withdrawn.
The claims portal for the third grant closed on 29 January 2021.
Applications for the second grant closed 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 they intend to continue to trade, the business has been adversely affected by coronavirus and has experienced reduced activity, capacity or demand which they reasonably believe will cause a significant reduction in trading profits; 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 experienced reduced activity, capacity or demand or has been temporarily unable to trade, such as:
- business accounts showing a reduction in turnover or activity;
- records of cancelled contracts or appointments;
- records of dates where the business had reduced capacity or demand or had to close due to lockdown restrictions; or
- records of Test and Trace instructions to self-isolate, NHS letters advising shielding, coronavirus test results or communications from schools confirming parental caring responsibilities.
Making claims using an agent or adviser
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 (for the third grant, the impact on the trade does not satisfy the additional tests);
- 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.
SEISS grants are trading income
Irrespective of the accounting treatment, grants under the SEISS are taxable in the 2020/21 tax year (para 3(3), Sch 16, Finance Act 2020). It therefore follows that the grants should be included as income when considering whether to reduce payments on account for 2020/21.
There has been speculation that the fourth SEISS grant might be taxable in 2021/22, but that would require a change to the primary legislation.
Finance Act 2020 also ensures that SEISS grants are treated as trading income when calculating trading profits or losses. There will be separate boxes in the self-employment and partnership sections of the 2020/21 self assessment tax return for reporting the grants. It follows that SEISS grants are trading income for pension contribution purposes.
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.
ICAEW Know-How from the Tax Faculty
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
- 26 Nov 2020 (12: 00 AM GMT)
- Updated in light of announcements confirming details of third and fourth grant periods.
- 09 Feb 2021 (12: 00 AM GMT)
- Updated to reflect confirmation that details of the fourth grant will be provided at the Budget on 3 March and to reflect the closure of the application portal for the third grant on 29 January.
HMRC support on SEISS
HMRC's phone line should only be used where it has not been possible to resolve queries using online support. HMRC asks that webchat be used.
Support for ICAEW members
The best way to contact ICAEW for real-time support is via live web chat. (Monday to Friday: 9am to 5pm, Wednesday: 10am to 5pm)
You can read more about these grants and the timetables in the Bloomsbury Professional coverage.