Information on the now closed Self-employment Income Support Scheme (SEISS), including information on the eligibility criteria and the level of the grant, as well as the tax treatment and making repayments.
What you need to know
Who could claim: Self-employed individuals or a member of a partnership (as long as certain eligibility criteria are met, see below). Limited companies and trusts were not entitled to claim.
Subject to eligibility, the second, third, fourth and fifth grants could be claimed even if previous grants were not claimed.
How much could be claimed:
- The fifth grant was set at 80% of three months’ average trading profits capped at £7,500 for those whose turnover had reduced by 30% or more.
Those with a turnover reduction of less than 30% received a grant based on 30% of three months’ average trading profits, capped at £2,850.
- The fourth grant was calculated as 80% of the average of three months' trading profits, up to a maximum of £7,500.
- The third grant was 80% up to a maximum of £7,500.
- The second grant was 70% up to a maximum of £6,570.
- The first grant was 80% up to a maximum of £7,500.
Average trading profits: Average trading profits for the fourth and fifth grants were based on 2016/17, 2017/18, 2018/19 and 2019/20, where available, with some exceptions for particular circumstances.
Average trading profits for grants one to three were based on 2016/17, 2017/18 and 2018/19.
Is the grant taxable: Yes, the grants are subject to income tax and self-employment national insurance contributions in the year in which they are received. The grants were originally all taxable in 2020/21; following the extension of the scheme, Finance Act 2021 included a measure to change the tax treatment to a receipts basis (irrespective of basis periods). Different rules apply where a partnership agreement states that the grant must be paid into the partnership and distributed to partners in accordance with the partnership agreement. Further detail can be found in TAXguide 12/21 COVID-19 support grants tax considerations.
Webinar: SEISS grants update
In this webinar Caroline Miskin, from ICAEW's Tax Faculty, navigates the significant changes to the fifth SEISS grant and covers related tax return and compliance issues.
First and second grants
Self-employed individuals and members of a partnership were eligible where the taxpayer:
- submitted their 2018/19 self assessment tax return by 23 April 2020;
- traded in the tax year 2019/20;
- intended to continue to trade in the tax year 2020/21;
- carried on a trade which had been adversely affected by coronavirus.
HMRC 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 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 was expected to keep evidence of the impact on their trade, but there was no link between the amount of the grant and the financial loss. The list is not exhaustive; for example, a business might have been adversely affected if it had to write off a bad debt because a customer had ceased trading due to coronavirus.
The scheme specifically allowed a claim where the trade had continued, so long as the trade was ‘adversely affected’. During the application process, the taxpayer was asked to confirm that they met the eligibility criteria, but the importance of the questions may have been missed by some and others may have worried about them unnecessarily.
HMRC’s original guidance was not specific about when a business needed 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 have been adversely affected after 13 July 2020.
The taxpayer's trading profits must also have been 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 amounts of the grants were based on the average trading profits for the relevant years. Examples are available in HMRC’s guidance (withdrawn but still available for reference). Note that the grants were calculated using the trading profits shown on the tax returns; no adjustment was made if the taxpayer traded for only part of a tax year.
Additional, tighter, eligibility criteria were introduced for the third grant.
To be eligible for the third grant, taxpayers needed to meet the eligibility criteria for the first and second grants and also:
- have experienced reduced activity, capacity or demand or have been 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 believed the impact would 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 published additional guidance and examples (withdrawn but still available for reference) to help claimants check whether they were eligible.
The significant reduction in trading profits test was 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 had to forecast their results to establish eligibility and it will be difficult for HMRC to enforce effectively. HMRC’s guidance indicates that it expected claimants to make ‘an honest assessment’ about whether they reasonably believed that their business would 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 could be made where the reduced activity, capacity or demand was caused solely because the person was required to self-isolate, or care for a person required to self-isolate, as a result of travelling to the UK.
Fourth and fifth grants
The eligibility criteria were revised for the fourth and fifth grants to take 2019/20 tax returns into account, but were otherwise unchanged from the third grant.
Self-employed individuals and members of a partnership were eligible where the taxpayer:
- submitted their 2019/20 self assessment tax return by 2 March 2021;
- traded in the tax years 2019/20 and 2020/21;
- were currently trading but impacted by reduced demand due to coronavirus, or had been trading but were temporarily unable to do so due to coronavirus;
- intended to continue to trade; and
- reasonably believed there would be a significant reduction in their trading profits.
The taxpayer's trading profits must have been no more than £50,000 and more than half of their total income for either:
- the tax year 2019/20; or
- the average of the tax years 2016/17, 2017/18, 2018/19 and 2019/20.
For the fourth and fifth grants HMRC based its calculations on the tax return data for 2016/17 to 2019/20 held in its systems on 2 March 2021. All 2016/17 to 2019/20 tax returns filed by 2 March 2021 were taken into account, as were any amendments, assessments or contract settlements made by that date.
HMRC’s guidance (withdrawn but still available for reference) explains how the turnover test operated as follows:
Claimants needed to provide two turnover figures during the claims process.
The two figures required were for:
1. The pandemic period.
The turnover figure required was for a 12-month period starting on any date between 1 and 6 April 2020. Those who prepare accounts on a tax year basis were able to use the same figure as would appear on their 2020/21 tax return (it was not necessary to submit the return before making a claim, but the turnover figure for the SEISS claim may be checked after the return is filed). Those who use a different accounting date needed to make a separate calculation. The turnover figure was for all of the taxpayer’s businesses, but excluded COVID-19 support payments (such as: SEISS grants, eat out to help out payments and local authority/devolved administration grants).
2. The reference period
In most cases this was the turnover figure from the 2019/20 tax return but there was an option to use 2018/19 if 2019/20 was not a normal year for the business. There were provisions to adjust the turnover figure if the accounting period was longer or shorter than 12 months but there was no requirement to make an adjustment if the period covered was less than 12 months because the business started or ceased in the tax year (this meant that the comparison was sometimes not between two 12-month periods).
Those who started trading in 2019/20 and did not trade in any of the tax years 2016/17, 2107/18 or 2018/19 were required to provide turnover figures and received a grant based on 80% of trading profits.
Partners needed to provide turnover figures for the partnership as a whole unless they also had other trades, in which case they were able to use their share of the partnership turnover.
What time period was covered?
HMRC and HMT have confirmed to the Tax Faculty that, despite communications to the contrary, SEISS grants did not relate to any particular periods or seek to replace lost income over a particular period.
- The first grant, billed as covering March to May 2020, was available to businesses adversely affected up to 13 July 2020.
- The second grant, billed as covering June to August 2020, was available to businesses affected on or after 14 July 2020.
- The third grant, billed as covering November 2020 to January 2021, was available to businesses impacted between 1 November 2020 and 29 January 2021.
- The fourth grant, billed as covering February to April 2021, was available to businesses impacted between 1 February and 30 April 2021.
- The fifth grant, billed as covering May to September 2021, was available to businesses impacted between 1 May and 30 September 2021.
How to apply
- for the fifth grant on 30 September 2021;
- for the fourth grant on 1 June 2021;
- for the third grant on 29 January 2021;
- for the second grant on 19 October 2020; and
- for the first grant on 13 July 2020.
How to request a review of entitlement
Taxpayers were able to request a review of their entitlement to an SEISS grant because:
- HMRC said they were not eligible and they wished to dispute their SEISS eligibility status, or
- they disagreed with the amount of the grant calculated by HMRC and wished to dispute the SEISS award amount. The taxpayer could only claim the amount of grant calculated by HMRC; there was no option in the application process to claim a higher or lower amount.
The option to request a review is still available for very exceptional cases – contact the SEISS helpline.
If the taxpayer is not satisfied with the outcome of a review they, or their agent, can 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 and for the third and subsequent grants, the impact on the trade does not satisfy the additional tests;
- the trade did not continue, for the first three grants in the tax year 2019/20 and for the fourth and fifth grants in 2019/20 and 2020/21. For example, this might be because the business was incorporated; or
- there was no intention to continue to trade.
The repayment process also allows taxpayers to voluntarily repay some or all of their grant.
Amendments to tax returns
The first three grants were based on tax returns filed up to 23 April 2020, but no account was taken of any amendments made after 18:00 on 26 March 2020. Amendments made after this date were disregarded for the first three grants.
For grants four and five HMRC based its calculations on the tax return data for 2016/17 to 2019/20 held in its systems on 2 March 2021. All 2016/17 to 2019/20 tax returns filed by 2 March 2021 were taken into account, as were any amendments made by that date.
A new requirement was introduced for grants four and five and requires careful attention. Amendments to tax returns for any of the relevant tax years which are made after 2 March 2021 and which would reduce the amount of the grant or would cause the taxpayer to be no longer be eligible must be notified to HMRC and the appropriate amount of grant repaid, subject to a deminimis of £100.
HMRC has confirmed that amendments include HMRC corrections, taxpayer amendments and HMRC amendments made as a result of an enquiry. Amendments does not include contract settlements, revenue assessments or charges raised as these are considered not to modify the tax return.
SEISS grants are trading income
SEISS grants were taxable in the 2020/21 tax year (para 3(3), Sch 16, Finance Act 2020), irrespective of the accounting treatment or basis periods. Following the extension of the scheme to provide a fourth and fifth grant, the tax treatment needed to change and a measure in Finance Act 2021 ensures that grants are taxed in the tax year in which they are received, irrespective of accounting treatment or basis periods.
Finance Act 2020 ensures that SEISS grants are treated as trading income when calculating trading profits or losses. It follows that SEISS grants should be included as income when considering whether to reduce payments on account and are trading income for pension contribution purposes.
Further detail can be found in TAXguide 12/21 COVID-19 support grants tax considerations.
Groups that missed out on SEISS
- Started self-employment or joined a partnership since 5 April 2020.
- Self-employment or partnership income of more than £50,000.
- Trades incorporated since 5 April 2020.
- 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% rules.
- Earnings reduced because of parental leave or illness in base period.
- Didn’t file their 2018/19 self assessment return by 23 April 2020 (grants one to three) or their 2019/20 return by 2 March 2021 (grants four and five).
The legislation that enacts the SEISS is directions made under Sections 71 and 76 of the Coronavirus Act 2020.
Help and support
HMRC (guidance has been withdrawn but remains available for reference).
ICAEW Know-How from the Tax Faculty
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- 14 Dec 2021 (12: 00 AM GMT)
- Updated to reflect the closure of the scheme
- 29 Jul 2021 (12: 00 AM BST)
- Update to reflect the opening of the claims portal for the fifth grant.
- 06 Jul 2021 (12: 00 AM BST)
- Insertion of the 'Turnover test' section explaining the turnover test being applied to the fifth grant.
- 05 Jul 2021 (12: 00 AM BST)
- The word 'not' was added to the last sentence in the Amendments to tax return section so that it reads 'considered not to modify the tax return.'
- 19 Apr 2021 (12: 00 AM BST)
- Text has been updated in light of the claims portal opening and to insert a new section, "Changes to tax return".
- 17 Mar 2021 (12: 00 AM GMT)
- Updates have been made throughout in line with the announcements made in the Budget on 3 March 2021
- 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.
- 26 Nov 2020 (12: 00 AM GMT)
- Updated in light of announcements confirming details of third and fourth grant periods.
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.