The Self-Employment Income Support Scheme (SEISS) has been extended and the claims portal for the third grant is due to open on 30 November 2020.

There are some notable eligibility changes to the third SEISS grant, which will have a significant impact on self-employed individuals or members of a partnership looking to apply for the funding.

If you are considering claiming for the third grant when the portal opens, you need to ensure that you are in fact eligible to claim under the new rules which were published on 25 November. These new rules make it much more difficult to claim and reduce eligibility for the extended government support.

What are the key changes to the third grant?

With the first two SEISS grants, self-employed traders were required to show that their business had been adversely affected as a result of coronavirus.

The third grant has different eligibility criteria, in order to make a successful claim, a business must have had a new or continuing impact from coronavirus between 1 November 2020 and 29 January 2021.

In addition to this, the claimant must either

  • Be currently trading but are impacted by reduced demand due to coronavirus; or
  • Have been trading but are temporarily unable to do so due to coronavirus

They must also declare that

  • They intend to continue to trade; and
  • They reasonably believe there will be a significant reduction in their trading profits due to reduced activity, capacity or demand or inability to trade due to coronavirus.

What is meant by a significant reduction in profits?

Prior to making a claim through the scheme, there must be a reasonable belief that trading profits will be significantly reduced.

Click here for some examples of what constitutes ‘significant reduction’ in trading profits.

The new government direction makes it clear that the ‘significant reduction in trading profits’ applies to the tax year as a whole. Depending on a business’s accounting period, this means claimants will be required to forecast their results in order to determine eligibility.

If you need assistance from M+A Partners to forecast your business profits for the year then please contact us before making your claim, to ensure that you are in fact eligible to claim under the new, tightened, eligibility criteria.

As some tax returns relating to the relevant accounting period could be submitted as late as 2023, HMRC are asking claimants to make ‘an honest assessment’ about whether they reasonably believe that they will experience a significant reduction in trading profits.

What is meant by ‘reduced demand’ and ‘temporary closure’?

HMRC give examples of reduced demand as

  • The claimant has fewer customers or clients than would normally be expected, resulting in reduced activity due to social distancing or government restrictions;
  • One or more contracts have been cancelled and not replaced; or
  • Less work has been carried out due to supply chain disruptions.

Claims should not be made if the only impact on their business is increased costs. For example, if you have had to purchase face masks and cleaning supplies, this would not be considered as reduced demand, according to the new rules published on 25 November 2020.

HMRC give examples of temporary closure as

  • The business has had to close due to government restrictions;
  • The claimant has been instructed to shield or self-isolate in-line with NHS guidelines and is unable to work from home (return from foreign travel does not qualify);
  • The claimant has tested positive for coronavirus and is unable to work; or
  • The claimant cannot work due to parental caring responsibilities, for example as a result of school or childcare closures.

Click here for further examples of reduced demand or unable trade.

Who can claim?

Individuals or members of partnership must have traded in both tax years:

  • 2018 to 2019 and submitted a Self-Assessment tax return on or before 23 April 2020 for the year; and
  • 2019 to 2020.

Anyone not eligible for the first and second grants, based on the information in their Self-Assessment tax returns, will not be eligible for the third grant.

Specific circumstances can also affect eligibility, click here for more details.

How much is the grant?

  • The third taxable grant is worth 80% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits and capped at £7,500; and
  • The grant is subject to Income Tax and self-employed National Insurance and must be reported on the 2020 to 2021 Self-Assessment tax return.

How does HMRC calculate eligibility?

  • HMRC looks at the applicant’s 2018 to 2019 Self-Assessment tax return;
  • Trading profits must be no more than £50,000 and at least equal to non-trading income;
  • If the applicant is not eligible based on the 2018 to 2019 return, HMRC will look at the tax years 2016 to 2017 and 2017 to 2018.

How to apply

  • Applications for the third grant will open from 30 November 2020;
  • Claims can be made from the date specified within the email or letter received by the applicant;
  • Claims must be made on or before 29 January 2021; and
  • All applicants must retain evidence to support their claim and show how the business has been impacted by coronavirus, resulting in less activity than otherwise expected.

There will be a fourth grant covering February 2021 to April 2021 and HMRC will set out further details on this in due course.