SEISS 5th Grant: When and How Can I Claim the 5th Self-employed Grant?

SEISS 5th Grant covering May 2021 to September 2021 is now open!

You can claim the 5th grant using the link here: Claim 5th SEISS grant

How Can I Claim the 5th Self-employed Grant?

To claim the SEISS 5th Grant, you must declare that:

• – you intend to continue to trade
• – you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus from May 2021 to September 2021

You must keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.

HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits.

SEISS 5th Grant: When and How Can I Claim the 5th Self-employed Grant?

The grant is taxable and will be paid out in a single instalment.

Further HMRC Guidance for claiming the grant will be available by the end of June 2021.

Who Can Claim the SEISS 5th Grant

To be eligible for the SEISS 5th grant you must be a self-employed individual or a member of a partnership.

When you must have traded

You must have traded in the tax years:

• – 2019 to 2020 and submitted your tax return on or before 2 March 2021
• – 2020 to 2021

You must either:

• – be currently trading but are impacted by reduced demand due to coronavirus
• – have been trading but are temporarily unable to do so due to coronavirus

Your tax returns

To work out your eligibility for the SEISS 5th grant, HMRC will first look at your 2019 to 2020 Self Assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.

If you’re not eligible based on your 2019 to 2020 tax return, HMRC will then look at the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020.

Deciding if you can claim

You must declare that:

• – you intend to continue to trade
• – you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus from May 2021 to September 2021

How the SEISS 5th Grant is Different

The amount of the SEISS 5th grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.

The portal to apply for the final self-employed income support scheme grant (SEISS-5) is due to open later this month, but this time traders need to do their homework first or they will fall at the first hurdle.

As was the case for the first four SEISS grants, accountants won’t be permitted to apply on behalf of clients, so a good deal of hand-holding will be required for some traders.

SEISS 5th Grant – Qualifying conditions

When applying for the first two SEISS grants the trader had to make a declaration that their business had been ‘adversely affected’ by the Covid restrictions, which is a term open to much interpretation.

To qualify for the third and fourth SEISS grants the trader also had to declare that their sales had reduced in the qualifying period due to the pandemic, compared to what would reasonably be expected for that period. However, the taxpayer was not asked to supply any figures to back up this assertion that sales were actually less than expected.

We were warned back inJune that HMRC was tightening up the turnover test for the fifth SEISS grant and that taxpayers would have to prove their sales had reduced in order to qualify. HMRC has now released guidance on how to work out turnover for this test, but it is not logical and it may well confuse tax advisers and taxpayers alike.

There are four steps to achieve the two figures necessary for the application:

Step 1: 2020/21 turnover

Forget basis periods and accounting periods, what HMRC wants here is the turnover that fits almost exactly into the tax year 2020/21. This is the gross sales received in a 12-month period that started from 1 April 2020 to 5 April 2020 – essentially the sales recorded in that year.

Where the trader makes up their accounts for any period other than the tax year, this turnover figure won’t be the taxable turnover for the tax year 2020/21. However, the HMRC guidance seems deliberately designed to confuse, as it tells the taxpayer to refer to their 2020/21 self assessment tax return to find their turnover figure.

Mercifully the fifth bullet point under “where to find your turnover figure” advises the taxpayer to ask their accountant or tax adviser.

Step 2: Adjustments for grants

HMRC suggests that checking the business bank account for money received for customers is a good way to determine the turnover figure for the required 12-month period(!).

Where the taxpayer has treated ‘money in’ as turnover they must then deduct any amounts of Covid-related business support grants received from that figure. This includes SEISS and Eat Out to Help Out grants, and any local authority grants. Although these grants are all taxable, and must be included in the taxable profit reported on the trader’s tax return, they are not part of the turnover figure for this exercise.

Commenced or ceased trading

The guidance on turnover appears to have been written by someone who hasn’t read the other conditions for the SEISS grants; it says where the business has started or ceased in 2020/21 the trader should include all the turnover received in the year to April 2021, even if the trade covered less than 12 months. This is surprising as if the trader has ceased trading before 6 April 2021 and doesn’t intend to trade in 2021/22 they will not qualify for the SEISS-5 grant at all.

Similarly, the trader must have been in business before 6 April 2020 and submitted a tax return including self-employed profits for 2019/20 by 2 March 2021, in order to qualify for the SEISS grant.

It is possible that the trader could have several successive or concurrent trades, in which case the sales figures for all trades must be aggregated for the year to April 2021.

Partners

The directions for partners had me scratching my head.

Partners who have no other business are told to use the partnership’s total turnover figure for the year to April 2020, with no adjustment for the proportion relating to the particular partner’s profit share.

Partners who also have another concurrent business, or who joined the partnership in 2020/21, must include only the proportion of the partnership turnover that relates to their profit share in their reference year (see step 3).

Step 3: Reference year

The reference year is used to determine the turnover figure used as the base comparison to the 2020/21 turnover (result of step 2).

For most taxpayers the reference year is the turnover reported on the 2019/20 tax return, but for new partners it will be turnover/ profit share for 2020/21. If 2019/20 was an unusually low year, the reference year turnover is that reported on the 2018/19 tax return.

Note the guidance has now switched to looking at turnover for an accounting period not the turnover received in the tax year. For a business that makes up accounts to 30 April, it will compare the sales booked in:

• Reference year: 1 May 2018 to 30 April 2019; to
• 2020/21: 6 April 2020 to 5 April 2021

Step 4: Compare the figures

Only where the reference year turnover is higher than the 2020/21 turnover (result of Step 2) will the taxpayer qualify for the SEISS-5 grant.

If the 2020/21 turnover has reduced by 30% or more compared to the turnover in the reference period, the grant will be 80% of three months average profits capped at £7,500. In other cases where the reduction in turnover is less than 30%, the grant is 30% of three months average profits capped at £2,850.

Remember in all cases the comparison is of turnover not profits of the business.

When You Can Claim the SEISS 5th Grant

Claims must be made directly by self-employed individuals and cannot be processed by agents or accountants.

When Will the 4th and 5th Grants be Taxable?

For any SEISS payments received on or after 6 April 2021, Section 106 and Schedule 16 FA 2020 will be amended so that the grant will be taxable in the tax year it was received.  For most people, this means that the 4th and 5th grants are likely to be taxed in 2021/2022.

How Can MCL Accountants Help?

Contact MCL Accountants Southend on 01702 593 029 to optimise your tax position or if you need any assistance with the preparation and submission of your self-assessment tax returns to HMRC.

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Ishan Madan( CHARTERED CERTIFIED ACCOUNTANT (FCCA) )

Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.

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