Self-Employed Income Support Scheme (SEISS)
The first Self-Employed Income Support Scheme (SEISS) paid self-employed individuals an amount equivalent to up to 80 per cent of their average monthly trading profits, capped at £2,500, to cover at least the three months from March.
This was paid in a single lump-sum and based upon tax returns from 2016-17, 2017-18 and 2018-19. Applications for the current round of funding remain open here until 13 July 2020.
A second round of funding was then made available for applications from August equal to 70 per cent of average monthly trading profits, capped at £6,570 and paid in a single instalment.
The scheme has subsequently been extended and two further rounds of funding have been announced. The next round will pay up to 40 per cent of average monthly trading profits, capped at £1,875 over three months. Details of the fourth round of funding are yet to be confirmed.
To qualify for the additional grants, applicants must meet these additional criteria:
- Be currently eligible for the SEISS (although it is not necessary to have claimed the previous grants);
- Declare that they are currently actively trading and intend to continue to trade;
- Declare that they are impacted by reduced demand due to COVID-19 in the qualifying period.
These measures will seek to amend or work alongside the existing SEISS eligibility requirements, which state that a taxpayer will be eligible where they:
- Submitted their Self-Assessment tax return for the tax year 2018/19 by 23 April 2020;
- Traded in the tax year 2019/20;
- Intend to continue to trade in the tax year 2020/21;
- Carry on a trade which has been adversely affected by Coronavirus.
An applicant’s trading profits must still also be no more than £50,000 and more than half of their total income for either:
- The tax year 2018/19; or
- The average of the tax years 2016/17, 2017/18, and 2018/19.
Self-employed individuals will still be able to do business while they receive a grant from the scheme. This differs drastically from the Coronavirus Job Retention Scheme, which requires employees not to work to be eligible.
The scheme is only intended for those who have been ‘adversely affected’ due to COVID-19.
Applications for the second round of the scheme opened on 17 August and closed on 19 October 2020.
The Government is yet to publish details of the application periods for the third and fourth rounds of the scheme.
Self-employed people are eligible to apply for a Business Interruption Loan if they think they meet the criteria.
Alternatively, the Government has changed the rules around Universal Credit and Employment Support Allowance to ensure self-employed people can access the support they need immediately.
Applications for both these benefits can be found online if needed, as can details of the Business Interruption Loan.
HMRC will use turnover figures provided on tax returns and then to calculate trading profit, it will deduct expenses including:
- Office costs
- Travel costs
- Clothing expenses
- Staff costs (for example, in the case of a partnership)
- Things bought to sell on
- Financial costs, such as insurance or bank charges
- Costs of business premises
- Advertising and marketing, such as website costs
- Train courses
- Business expenses deducted through the trading allowance
- Capital allowances used to buy assets used in the business
- Qualifying care relief
- Flat rate expenses.
HMRC will also take into consideration:
- any business expenses deducted through the trading allowance
- capital allowances used to buy assets used in your business
- qualifying care relief
- flat rate expenses
Any losses carried forward from previous years and the personal allowance will not be deducted from trading profits.
HMRC will also consider other income reported on your self-assessment return. Your total income is the total of all your:
- income from earnings
- trading profits
- property income
- savings income
- pension income
- miscellaneous income (including social security income)
At the same time, HMRC has confirmed that it will not deduct losses carried forward from previous years from trading profits, nor will it deduct an individual’s personal allowance.
Grants from the various Government schemes to provide support during the Coronavirus outbreak are taxable in the same way as other income. Payments made under SEISS are considered to be taxable income.
The position had been set out in the various guidance documents for the schemes but has now been underscored by a series of Government amendments to the Finance Bill 2020.