Full details of the fifth SEISS grant, including a new turnover test which determines the level of the grant, are now available. ICAEW’s Tax Faculty explains what has changed.
In most respects the rules for the fifth Self-employment Income Support Scheme (SEISS) grant are the same as for the fourth grant. What has changed is that the level of the grant depends on whether turnover has dropped by more or less than 30%.
The fifth grant is 80% of three months’ average trading profits capped at £7,500 for those whose turnover has reduced by 30% or more. Those with a turnover reduction of less than 30% will receive a grant based on 30% of three months’ average trading profits, capped at £2,850.
Self-employed individuals and members of a partnership are potentially eligible for the fifth SEISS grant 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;
- is currently trading but is impacted by reduced demand due to coronavirus, or has been trading but is temporarily unable to do so due to coronavirus;
- intends to continue to trade; and
- reasonably believes there will be a significant reduction in their trading profits due to the impact of COVID-19 in the period from 1 May 2021 and 30 September 2021.
The taxpayer's trading profits must be no more than £50,000 and at least 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.
These criteria are unchanged from the fourth grant. HMRC will contact taxpayers in mid-July and claims will open in late July. Claims must be made by 30 September 2021.
What was uncertain was how the turnover test which determines the level of the grant will operate. HMRC’s guidance now explains it as follows:
Claimants will need to provide two turnover figures during the claims process, and it is advisable to have these two figures available before starting to make the claim.
The two figures required are for:
1. The pandemic period.
The turnover figure required is for a 12-month period starting on any date between 1 and 6 April 2020. Those who prepare accounts on a tax year basis will be able to use the same figure as will appear on the 2020/21 tax return (it is not necessary to submit the return before making a claim, but the turnover figure for the SEISS claim will be checked after the return is filed). Those who use a different accounting date will need to make a separate calculation. The turnover figure should be for all of the taxpayer’s businesses, but exclude 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 will the turnover figure from the 2019/20 tax return but there is an option to use 2018/19 if 2019/20 was not a normal year for the business. There are provisions to adjust the turnover figure if the accounting period was longer or shorter than 12 months but there is no requirement to make an adjustment if the period covered is less than 12 months because the business started or ceased in the tax year (this can mean that the comparison is 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 will not be required to provide turnover figures and will receive a grant based on 80% of trading profits.
Partners will need to provide turnover figures for the partnership as a whole unless they also have other trades, in which case they can use their share of the partnership turnover.
ICAEW’s guidance on SEISS grants will also be updated.
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.
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.