Second grant for SEISS to be rolled out

SEISS is to be extended and a second and final grant will be available from 17th August 2020. The deadline (at the moment) for claiming is 19th October 2020.

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This taxable grant will be worth 70% (down from 80% from the first grant) of average trading profits from 16/17, 17/18 and 18/19, again paid out in a single instalment and covering three months’ worth of profits. The second grant will be capped at £6,570 (down from £7,500 from the first grant). The second grant is for the period 14th July 2020 onwards (the first grant ran up to 13th July 2020).

The eligibility criteria for the second grant will be the same as for the first grant and for ease of reference are as follows:

  • Have submitted a tax return for the tax year 18/19 on or by 23rd April 2020.
  • Have traded in the tax year 19/20.
  • Are trading when apply or would be except for COVID-19.
  • Intend to continue to trade in the tax year 20/21.
  • Have lost trading/partnership trading profits due to COVID-19. Records should be kept to support this.
  • Average self-employed trading profits between £0 - £50,000.

Additionally, more than half of total income comes from self-employment.

One of the following conditions A to C must be met to be eligible for the scheme:

  1. Trading/partnership profits are between £0 - £50,000 for 18/19 and those trading profits are more than half of total taxable income for that year; or
  2. Average trading/partnership profits for the three years 16/17, 17/18 and 18/19 are between £0 - £50,000 and average trading profits for those years are more than half of total taxable average income for those same years; or
  3. If you didn’t trade in 2016-17, average profits/partnership profits for the two years 17/18 and 18/19 are between £0 - £50,000 and average trading profits for those years are more than half of total taxable average income for those same years.

From July 2020 a proposed modified extra condition for parents, including adoptive parents, who took time out of trading to care for their children within the first 12 months of the birth of the child or within 12 months of an adoption placement:

  • If trading profits dipped in 18/19 due to parenting, you will now be able to use either 17/18 or both their 16/17 and 17/18 self-assessment returns as the basis for their eligibility for the SEISS.

Claimants do not need to have claimed the first grant to claim the second grant, but will have to confirm that their business has been adversely affected on or after 14th July 2020.

To claim you will need your:

  • UTR.
  • National Insurance number.
  • Government Gateway user ID and password.
  • UK bank details (only provide bank account details where a Bacs payment can be accepted) including:
  • Account number.
  • Sort code.
  • Name on the account.
  • Address linked to the account.

How to Claim:

The online service is not available yet. If eligible uyou will be able to make a claim for a second and final grant from 17th August 2020. HMRC will contact businesses they believe are eligible. As with the first grant it would be prudent to undertake your own due diligence, but checking if you are adversely affected will be key, as the upturn in the economy (albeit small) could disqualify some of the first claimers from the second round.

After the Claim:

HMRC will check the claim and pay the grant into the bank account in the next 6 working days. HMRC will also send an email when the payment is on its way.

HMRC should not be contacted unless it has been more than 10 working days since the claim was made and the payment hasn’t been received in that time.

If your business recovers after the claim, eligibility will not be affected. Evidence must be kept to confirm the business was adversely affected at the time the claim was made.

If you think the Grant is too low:

HMRC will use the information on the tax returns to work out the grant amount.

If you think the grant amount is too low, you should check how much you’ll get by visiting the following link:

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme#howmuch

If after visiting this site you still think the grant amount is too low, HMRC can be asked to review the grant amount.

Record Keeping and Reporting:

You must keep a copy of all records in line with normal self-employment record keeping requirements, including the:

  • Amount claimed.
  • Grant claim reference.

You should also keep any evidence that their business has been adversely affected by coronavirus at the time the claim is made, such as:

  • Business accounts showing a reduction in turnover.
  • Confirmation of any coronavirus-related business loans received.
  • Dates the business had to close due to lockdown restrictions.
  • Dates you or team members were unable to work due to coronavirus symptoms, shielding or caring responsibilities.

Members of Partnerships:

  • Each partner in a partnership must make a claim based on their own circumstances.
  • HMRC will work out eligibility based on their share of the partnership’s trading profits.
  • If the partnership agreement requires the grant to be paid into the partnership pot, the partnership should give it back to the individual partner.

Tax and Benefit Implications:

The grants are subject to tax and NIC as self-employed income:

  • The grants are to be included in taxable profits for the 20/21 tax year only, and not for 19/20.
  • The grants are classed as self-employed income for the purposes of universal credit claims.
  • Where a grant payment is received for more than one self-employment business it must be apportioned between them on a just and reasonable basis. 
  • Where the business has ceased, the grants are to be taxed as post-cessation receipts.

VAT Implications:

HMRC have not provided any guidance as to whether the grants will be subject to VAT or count towards turnover for VAT registration limits. Normal principles are expected to apply (but by no means certain) to mean:

  • The grants would be outside the scope of VAT and no output VAT should have to be accounted for.
  • The grant income should be disregarded for VAT registration and deregistration limits.

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