Self-Employment Income Support Scheme – the third grant scheme is now open

02 December 2020 - Elizabeth Nichols

Millions of  self-employed people have benefited from the SEISS (Self Employment Income Support Scheme), as the government has handed out in excess of £13.7 billion of grants so far to help them through the Covid-19 crisis.

Those who are eligible under the SEISS will now be able to receive a third grant worth 80% of their average monthly trading profits, with the money paid within six working days of making a claim.

Any taxpayer whose self-employed business has been adversely affected by coronavirus and is eligible for the scheme can apply for the grant. Claims for the first and second grants have now closed, but you don’t need to have claimed them in order to receive the third grant.

How do you know if you’re eligible?

HMRC has included examples on their website of situations where a self-employed person may be able to claim the grant. To be eligible for this third grant the self- employed person must have met the criteria of the first and second grants, and also declare that they have made an honest assessment about whether their business has had (and will have) a significant reduction in profits.

This means that you will have experienced (and will experience) reduced activity, capacity or demand or be temporarily unable to trade from 1 November to 29 January (2021) compared to what you might have expected in non-Covid circumstances, and that as a result Covid will cause a significant reduction in your trading profits. This may be because:

  • you are unable to find work due to the impact of Covid-19
  • you were not able to work as normal before, on or after 1 November 2020
  • you had significantly fewer customers as a result of social distancing rules
  • you have had contracts cancelled because of the impact of Covid-19

SEISS grants are based on your profits over three tax years.

This is based on an average of the tax returns for 2016/17, 2017/18 and 2018/19. If you did not trade in 2016/17, the grant will be based on the average of 2017/18 and 2018/19. If you did not trade in 2017/18, the amount is based on 2018/19 only – even if you traded in 2016/17.

You must have filed a tax return for 2018/19.

This means you must have been self-employed prior to 6 April 2019. The last date to file a 2018/19 tax return was 23 April 2020 (the deadline had been extended from 31 January 2020). If you only had a few months’ self-employment on your 2018/19 return, this is counted as your total profit for the year – the Government won’t pro-rata it based on your monthly profits.

To receive a grant you must show that you earned more than 50% of your total income from self-employment.

To check this, HMRC will check your 2018/19 tax return, and if you’re not eligible based on 2018/19 alone, it will then examine the tax years 2016/17, 2017/18 and 2018/19 to see if the average amount of your trading profits across the three years was more than 50% of your total income.

As with the earlier SEISS grants, your average trading profit must be less than £50,000 a year.

This is essentially a ‘cliff-edge’ requirement. Those people whose average annual trading profit is more than £50,000 will not be able to get any payments from this scheme. You also won’t be able to claim if you trade through a limited company or a trust.

Unlike the CJRS (the furlough employee scheme), you can claim for SEISS and keep working.

You will need to declare your business has been impacted between 1 November 2020 and 29 January 2021, and HMRC is introducing checks to prevent fraud. As it is a grant you won’t need to pay back the amount received, but you will have to pay tax and National Insurance on the money you receive, and you will need to declare that you have received the grant on your 2020/21 self-assessment tax return.

The third stage of SEISS is now open for applications and will close on 29 January 2021.

The government have said there will be a fourth grant to cover 1 February to 30 April, and details of this will be released early in 2021.

To make a claim, log in through the government gateway account (see the link below). You must keep evidence to support your claim.

IMPORTANT: You must make the claim yourself. Your tax agent or financial adviser must not claim on your behalf as this will trigger a fraud alert.

More information is available on the website – see below for some helpful links:

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