April 19, 2021
Article
As you will already be aware, the Government announced in the budget on 3 March 2021, that there would be a fourth and fifth grant payable under the SEISS, with further information to follow shortly after. At long last, they have now updated their guidance to include more precise details of the fourth grant. Please note that only limited information is still available in relation to the fifth grant which will be confirmed in more detail in due course.
What period does this grant cover?
The fourth grant will cover the 3 month period of February to April 2021.
The fifth grant will currently cover the 5 month period of May to September 2021.
Has anything changed from the first, second and third grants?
Yes - 2019/20 results have now been brought into the calculations. This means that you may now be eligible if you commenced trading after 6 April 2019.
All average calculations will now be based on the last 4 tax years – 2016/17, 2017/18, 2018/19 and 2019/20 – or less if you hadn’t traded in every year.
HMRC have estimated that this change will mean that an additional 600,000 taxpayers may now be eligible to claim, who haven’t previously been able to.
What criteria do I need to initially meet to see if I’m eligible?
You need to have submitted your 2019/20 tax return by midnight on 2 March 2021. If your tax return was submitted after this date, you will not be able to make a claim.
You need to be self employed or a partner in a partnership. Unfortunately, directors of limited companies are not eligible for the SEISS grants and should be eligible for different financial support, such as the furlough scheme.
You need to have traded in 2019/20 and 2020/21, or would have if it wasn’t for the pandemic hadn’t have occurred, and intend to continue to trade in the future.
Your business profits need to be less than £50,000 and make up over 50% of your total taxable income for 2019/20. If you do not meet these tests for 2019/20, you can look at the average over the last 4 years to see if you meet the criteria.
Can I still make a claim for the fourth and fifth grant, even if I didn’t claim the previous grants?
Yes, each grant works in isolation to each other so you do not need to have claimed any previous grants, to claim this fourth one.
This includes cases where you did not previously qualify, or you didn’t make a previous claim as hadn’t been adversely affected by Coronavirus.
I was eligible for the first, second and third grants, am I automatically eligible for the fourth and fifth grants?
Unfortunately, you will not be and you will need to look at the eligibility tests again.
Each test now includes 2019/20 as the base year and then the previous 4 tax years are taken into account for the average test.
This has also been recalculated based on all the information held by HMRC on 2 March 2021 so would include any updated figures from amended tax returns etc.
Therefore, this will mean that depending on your 2019/20 trading and income results, you may now no longer be eligible for the SEISS grants even if you have previously claimed under the scheme.
I meet the initial criteria; do I also need to satisfy any other points to claim?
Once you have satisfied the initial tests you will need to look at your position and how your business has been affected by Coronavirus.
These additional criteria points remain the same as those for the third grant, just have a basis period of February to April 2021 instead of November 2020 to January 2021.
For further details please see our previous article but as a reminder,
You must currently be trading or would have been if it wasn’t for government restrictions such as lockdown, and also intend to continue to trade after the pandemic.
AND
Your trade must also have suffered as a result of Covid-19, by either reduced activity, capacity or demand in the period 1 February 2021 to 30 April 2021.
AND
You must reasonably believe you will suffer a significant reduction in trading profits in the basis period in which this 3 month period is included. E.g. if you have a May year end, you will need to look at the projected results for the year ended 31 May 2021.
As part of the claim process, you will be required to make a declaration that you satisfy the above points.
How much grant will I receive?
Your grant will be calculated at 80% of 3 months of average trading profits. This will be calculated using the last 4 tax years, or less if you recently began trading. However this will be capped at £7,500.
The grant will be paid in one lump-sum direct to your bank account within 6 working days of your application being made.
When will I be able to make my claim?
Claims will open from late-April and HMRC will contact those taxpayers they believe could be initially eligible. They will give a date and time, that you will be able to apply from.
You can claim at any point from this date until 1 June 2021 when applications for the fourth grant will close.
How do I make the claim?
The process remains the same as previous grant claims and you will claim using your Government Gateway account.
If you have previously not made a claim, you will need to ensure you have an account set up ready to make your claim and we would recommend doing this beforehand, so you are ready to go when applications open. You should be able to check your eligibility and set up an account here.
However this can be done when applications open and further information can be found here.
Do I need to pay tax on the grant income?
Yes – all SEISS grants are liable to tax and class 4 national insurance.
They are taxable at the date of receipt and therefore the first, second and third grants will need to be included on your 2020/21 tax return. The fourth and fifth grants will be included on your 2021/22 tax return. This is regardless of your accounting year end.
I have since amended an earlier tax return, do I need to inform HMRC?
HMRC have used all the information they held on 2 March 2021 to calculate the fourth and fifth grant positions. If you amend one of your tax returns, or submit final figures for a previous provisional return, after this date and the amendment results in you being entitled to a lower amount of grant, you need to inform them and repay the excess within 90 days of the amendment.
This also includes an amendment which would mean that you are no longer eligible to receive any grant, for example your amended profits exceed £50,000.
If you fail to inform them, HMRC will contact you after the deadline to tell you what amount needs to be repaid. They may also charge a penalty.
As a result of the amendment, if the grant amount would reduce by £100 or less, you do not need to inform them and no further action is necessary.
If the amendment would increase the amount of grant you are entitled to, unfortunately you will not be able to claim any additional funds.
This does not apply to the first, second and third grants and therefore only amendments made after 3 March 2021 need to be taken into account. Further details can be found here.
If you do have any queries, then please get in touch with your usual point of contact at Albert Goodman.