The deadline to apply for the third self-employment income support scheme (SEISS) grant is rapidly approaching. Applications for the grant must be made by 29 January 2021.
Eligibility criteria for the third grant has been tightened and will only be available to self-employed individuals who:
- qualified for the SEISS under the existing rules for the initial grants (although they do not have to have made a claim under the scheme); and
- are actively continuing to trade but are facing reduced demand due to COVID-19 in the qualifying period; or
- were previously trading but are unable to do so, temporarily, due to COVID-19.
In addition to the above, the guidance imposes a new condition, requiring a declaration from the taxpayer that they intend to continue to trade and that they reasonably believe that there will be a significant reduction in their trading profits.
It is understood that this latest trading profits test applies to the accounting period as a whole and not just the relevant period to which the claim relates. Some future forecasting of profits may therefore be required, and evidence retained to support any assumptions made. Grants received under the first and second SEISS grants, do not need to be taken into account.
HMRC has provided some further detail and examples on how to judge whether this new test has been satisfied and a few points to note include:
- The reduced trading activity and hence trading profits must be as a direct result of the coronavirus pandemic. Examples of this include closures of businesses or reduced activities due to government restrictions, supply chain issues due to coronavirus reducing the amount of work that the taxpayer can carry out, or contracts cancelled and not replaced.
- An individual will not be eligible to claim where short periods of being unable to trade during the period from 1 November 2020 to 29 January 2021, are not expected to significantly impact overall trading profits.
- Reduced trading profits must be due to reduced income/lost clients and not just because of additional expenses such as purchases of PPE, cleaning supplies and screens.
- Full details of the examples provided by HMRC can be found here.
How much can be claimed?
The third grant under the SEISS will cover 80% of average monthly trading profits, paid out in a single instalment covering the first three months’ worth of profits, and capped at £7,500 in total.
The fourth and final grant will cover the second three-month period from the start of February until the end of April, although the amount of this grant will not be confirmed until the Budget on 3 March 2021.
As with previous grants under the scheme, they should be treated as taxable income and are also subject to national insurance contributions.