Tax update: SEISS fifth grant – a new condition

Published: Wednesday 7 July 2021

HMRC has finally published its awaited guidance on claiming the fifth and final self-employed income support scheme (SEISS) grant. The biggest change, from previous grants under this support scheme, is that the amount which can be claimed will now be linked to a new ‘turnover test’.

The new test

To determine how much you can claim, you will first need to calculate two turnover figures: one for 2020/21 and then a second, reference figure, taken from either the 2019/20 or 2018/19 tax years.

1. 2020/21 turnover

The first figure to calculate is your turnover for 2020/21. The guidance stipulates that this should be for a 12-month period which begins between 1 April 2020 and 6 April 2020 (i.e. broadly in line with the tax year). If your accounts are prepared to a different period, you will need to recalculate your income based on the 12 months to a date ending between 31 March 2021 and 5 April 2021.

The guidance confirms that, although taxable, any COVID-19 related support grants received during this period (e.g. other SEISS grants and Eat Out to Help Out grants) should not be included when calculating this turnover figure.

2. Reference turnover

Although the turnover figure for 2020/21 is based on income for the 12-month period commencing in April 2020, the guidance suggests that for the reference year you instead look at turnover based on your accounting period.  

In most cases, therefore, you will use the turnover reported on your 2019/20 tax return.  If 2019/20 was not a ‘usual year’ (e.g. lower than normal) you can use your 2018/19 turnover figure, but you will need to explain why turnover was lower than usual in 2019/20.

Points to note

The turnover figure will need to be adjusted if you have an accounting period of longer or shorter than 12 months. If you only started trading in 2019/20 and did not have any self-employment or partnership income in any of the tax years from 2016/17 to 2018/19, then you do not need to consider the turnover test and will be eligible for the higher grant.

The guidance has an oddity in that it states that if you are in a partnership and have no other businesses, you should take the partnership’s total turnover figure. However, more logically, it states that where you are in a partnership and have another business that you should include the percentage of total turnover equal to your profit share. Hopefully, this point will be clarified and guidance updated in due course. 

It also includes guidance for where the individual has started or ceased trading during 2020/21. If this is the case, however, it is unlikely you will be able to qualify for the SEISS grant (see other eligibility conditions below). We can only think that this has been included for circumstances where an individual has a number of trades, to clarify that turnover from all trades in the relevant period must be aggregated to calculate the total turnover figure, even if one of those has recently commenced or ceased.

How much can I claim?

Once you have worked out your two turnover figures, you can then determine the amount you can claim under the fifth grant as follows:

  • If your turnover for 2020/21 has reduced by 30% or more compared to your reference turnover, you can claim 80% of three months’ average trading profits, capped at £7,500.
  • If your turnover for 2020/21 has reduced by less than 30% compared to your reference turnover, you can claim 30% of three months’ average trading profits, capped at £2,850.

Other eligibility conditions

It should be noted that other eligibility criteria, in line with previous SEISS grants will also still need to be satisfied. Therefore, to be eligible to claim for the fifth grant:

  • You must have filed a tax return for 2019/20 by 2 March 2021 (if you had not previously been eligible for the first three grants).
  • Trading profits must be less than £50,000 and at least equal to any non-trading income.
  • You must have traded in both the 2019/20 and 2020/21 tax years.
  • You must either:
    • be currently trading but are facing reduced demand due to COVID-19 in the qualifying period; or
    • were previously trading but are temporarily unable to do so due to COVID-19.
  • You must also declare that you intend to continue to trade and that you reasonably believe that there will be a significant reduction in your trading profits due to COVID-19.

Next steps

HMRC will be contacting those individuals they believe are eligible for the fifth grant in mid-July with the online service to claim opening towards the end of the month. The claim window will close on 30 September 2021.

As with previous grants, agents are not able to claim the SEISS grants on behalf of taxpayers. We can, however, help with confirming if you satisfy the eligibility criteria and assist with calculating your relevant turnover figures. 

Key contacts

Nick Haines
Nick Haines
Partner
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