The Self-Employment Income Support Scheme (SEISS) fourth grant is now open for applications and has been made available to hundreds of thousands of people and businesses who were previously unable to claim support. In this guide, we’ll explain exactly what SEISS is, who is eligible and how to apply.
What is the Self-Employment Income Support Scheme?
The Self-Employment Income Support Scheme (SEISS) was announced by the government on 26 March 2020 as part of their plans to financially support self-employed people who lost income as a result of the restrictions in place for the coronavirus crisis.
So far, there have been three rounds of grants, referred to as SEISS 1, 2 and 3 and the government has just announced rounds 4 and 5.
The biggest difference between the first three grants and the fourth is the inclusion of 2019/20 tax returns, meaning roughly 600,000 recently self-employed starters will be eligible for the scheme. However, it’s worth noting that those who can claim SEISS 4 but weren’t eligible for SEISS 1, 2 and 3 cannot backdate and claim the previous grants.
How Much Can Be Claimed with the Fourth Grant?
The fourth grant is worth a maximum of 80% three months’ worth of average trading profits, subject to a cap of £7,500.
Who is Eligible for the Fourth SEISS Grant?
In order to qualify for the fourth SEISS grant, you must meet the following criteria:
- You must have filed a 2019/2020 tax return before midnight on 2 March 2021
- You must have traded in both tax years 2019-20 and 2020/21 and intend to continue to trade.
- Your business must have had a new or continuing impact from the coronavirus crisis which you believe will cause a significant reduction in trading profits.
- You must earn at least 50% of your total income from self-employment, meaning non-trading income mustn’t exceed 50% of your total income e.g. income from jobs, property, dividends, savings, pensions and taxable benefits.
- Your average trading profit must be £50,000 a year or less (See The Profits Condition)
- You don’t need to have applied for an earlier grant to qualify for the fourth grant.
- You can continue to work if you claim the grant.
Who isn’t Eligible for the Fourth SEISS Grant?
If you meet any of the following criteria, you will not be eligible for the SEISS grant:
- If you started your trade after 5 April 2020
- If you didn’t submit your 2019-20 tax return by 2 March 2021
- If your trading income forms less than half of your total income. This means over 50% of your income comes from non-trading sources such as jobs, property, dividends, savings, pensions and taxable benefits.
- You are the director of a limited company (See the Job Retention scheme)
- You operate a Furnished Holiday Letting business
- You are operating trade through a trust.
What is Meant by ‘Reasonable Belief that there will be a Significant Reduction in Trading Profits’?
In order to claim SEISS, you must reasonably believe that the reduced activity, capacity or demand due to the coronavirus crisis will result in a significant reduction in trading profits for your basis period.
These periods are:
- 13 May 2020 to 13 July 2020 for SEISS 1
- 14 July 2020 to 19 October 2020 for SEISS 2
- 1 November 2020 to 29 January 2021 for SEISS 3
- 1 February 2021 to 30 April 2021
It’s key to remember that this test is forward looking and requires the position across the entire basis period to be considered e.g. a business with a 31 March year end will need to consider whether the qualifying reduction in activity, capacity or demand will significantly reduce trading profits for the years ending 31 March 2021 or 2022 for SEISS 4.
There is no guidance from HMRC on their interpretation of ‘reasonable belief’ or ‘significant reduction’, relying on individuals to make their own honest assessments.
How Does the Scheme Work for Partnerships?
If you are a member of a partnership, HMRC will work out whether you are eligible for the scheme based on your share of the partnership’s trading profits. Depending on the partnership profit share ratios, this could mean some partners are eligible whilst others are not.
Here’s an example of how a partnership would work under SEISS 4:
A partnership only traded in 2019/20 and neither partners had any other source of income. They made £100,000 of trading profits in tax year 2019-20 which was distributed between the partners as follows:
Partner A – £60,000
Partner B – £40,000
Partner B would be eligible for SEISS 4 as their trading profits are less than the threshold of £50,000, however, as Partner A’s trading profits are above the £50,000, they would not qualify.
Previous Grants 1, 2 and 3
SEISS 1: 13 May 2020 – 13 July 2020
The scheme initially allowed self-employed individuals and members of partnerships to apply for a grant of 80% of their average trading profits for a three-month period, capped at £7,500.
In order to claim the grant, you must have had fit the following eligibility criteria:
- Self-employed individual or member of a partnership
- Carry on a trade which has been adversely affected by COVID-19 e.g. because you were unable to work or have had to stop trading between 13 May and 13 July 2020.
- Submitted your self-assessment return for the tax year 2018-19 on or before 23 April 2020
- Intend to continue trading in 2020-21
- Meet the profits condition (we’ll talk more about this later)
For SEISS 1, HMRC allowed individuals to use an online eligibility checker to work out if they were eligible for the scheme prior to making a claim, however, the checker was removed for SEISS 2 onwards and eligibility was confirmed as part of the application process.
SEISS 2: 17 August 2020 – 19 October 2020
SEISS 2 allowed self-employed individuals and members of partnerships to apply for a grant of 70% of their average trading profits for a three-month period, subject to a cap of £6,570.
In order to claim the grant, you must have had fit the following eligibility criteria:
- Self-employed individual or member of a partnership
- Carry on a trade which has been adversely affected by COVID-19 e.g. because you were unable to work or have had to stop trading between 14 July and 19 October 2020.
- Submitted your self-assessment return for the tax year 2018-19 on or before 23 April 2020
- Intend to continue trading in 2020-21
- Meet the profits condition (we’ll talk more about this later)
From SEISS 2 onwards, HMRC contact individuals they believe may be eligible for the grants, inviting them to apply online.
SEISS 3: 29 November 2020 – 29 January 2021
SEISS 3 allowed self-employed individuals and members of partnerships to apply for a grant of 80% of their average trading profits for a three-month period, subject to a cap of £7,500.
In order to claim the grant, you must have had fit the following eligibility criteria:
- Self-employed individual or member of a partnership
- Carry on a trade which has been adversely affected by COVID-19 e.g. because you were unable to work or have had to stop trading between 1 November 2020 and 29 January 2021.
- Submitted your self-assessment return for the tax year 2018-19 on or before 23 April 2020
- Intend to continue trading in 2020-21
- Meet the profits condition (we’ll talk more about this later)
Two additional conditions were added to the eligibility criteria which had to be met in order to qualify for the third grant. These were:
- The trade must have suffered from reduced activity, capacity or demand in the period from 1 November 2020 to 29 January 2021 as a result of COVID-19
- You must reasonably believe that you will suffer a significant reduction in trading profits for the basis period including those months as a result.
This also meant individuals could no longer claim for the third grand if the reduced activity, capacity or demand was caused solely due to the individual having to self-isolate or care for someone who was required to self-isolate as a result of travelling to the UK.
The Profits Condition
The profits condition is an essential condition for all SEISS grants so far, however, it will work slightly differently for SEISS 4.
The Profits Condition for SEISS 1, 2 and 3
In order to qualify for SEISS 1, 2 and 3 grants, you must have met any of the following three tests:
- For tax year 2018-19, your trading profits were:
- a) greater than nil but no more than £50,000 and;
- b) at least equal to your non-trading income for the year.
- You traded o each of the tax years 2016-17, 2017-18 and 2018-19 and:
- a) your average trading profits for those years were greater than nil but no more than £50,000 and;
- b) the total of those profits were at least equal to your non-trading income for those years.
- You traded in the tax years 2017-18 and 2018-19 but not 2016-17 and:
- a) your average trading profits for the tax years 2017-18 and 2018-19 were greater than nil but no more than £50,000 and;
- b) the total of those profits was at least equal to your non-trading income for those tax years.
The Profits Condition for SEISS 4
The profits condition will work slightly differently for SEISS 4 than the previous versions of the scheme as tax returns from 2019-20 will be taken into account provided they were submitted by midnight on 2 March 2021.
HMRC will first look at trading profits in tax year 2019-20 to check if these are:
- Greater than nil but no more than £50,000 and;
- At least equal to your non-trading income for the year.
If this isn’t the case, HMRC will take a look at the overall position in up to four previous tax years to determine whether:
- Your average trading profits for those years were greater than nil but no more than £50,000 and;
- The total of those profits was at least equal to your non-trading income for those years
As with SEISS 1,2 and 3, special rules will apply to taxpayers who are affected by the loan charge or where an individual would not otherwise qualify for the scheme due to the effect on their trading profits and other income in the 2019-20 tax year of military reservist activities or having a child.
How to Apply for SEISS 4
HMRC announced applications for SEISS 4 opened towards the end of April and claims must be made before 1 June 2021. You can apply online via the government website here.
In order to make a claim, you’ll need your:
- Self Assessment Unique Taxpayer Reference (UTR)
- National Insurance number
- Government Gateway user ID and password
- UK bank details including account number, sort code, name on the account and address linked to the account.
You may also be required to answer questions about your passport, driving license or information held on your credit file.
What do we Know about SEISS 5?
The government also announced a fifth grant which will cover May 2021 to September 2021. Applications are expected to open around late July. The grant amount will depend on how much an individual or partnerships turnover has decreased between April 2020 to April 2021.
If your turnover has reduced by 30% or more, the grant will be worth 80% of 3 months’ average trading profits subject to a cap of £7,500. If your turnover had reduced less than 30%, the grant will be worth 30% of 3 months’ averager trading profits subject to a cap of £2,850.
More information about SEISS 5 is yet to be announced.
For more help and advice on the financial support available for your business and how to apply, get in touch with our friendly team at Ryans for a chat! Our other services include:
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