We’re almost at the point where sole traders and members of partnerships can apply for the fifth (and final) grant under the Self Employed Income Support Scheme. So, who qualifies and how much do they get?
The big picture remains pretty similar to before, this time for those who were self-employed (but not those who work via a limited company) in both 2020-21 and 2019-20. The grant is for those whose income comes wholly or mainly from self-employed profits of less than £50,000 a year. You must have submitted your 2019-20 tax return by 3 March 2021, and you must continue to operate your business and intend to do so beyond the point of making the claim.
This final grant covers the period 1 May 2021 to 30 September 2021, and when making a claim you declare that you believe your profits will be significantly down for that specific five-month period, because of the impact of COVID-19 - the grant is only for those still struggling. If you’re doing OK now, you can’t apply.
So far, so good.
When it comes to the amount payable for those who qualify, though, there’s a twist. For grants 1 to 4 you either qualified or you didn’t - the amount you were paid was then just mechanical and based on a percentage of average profits. For grant 5, there’s an extra stage, though, designed to try and distinguish between different levels of distress. You might get 80% of your average quarterly profits, capped at £7,500 (the same as grant 1). But you might get just 30%! There’s a sudden and serious cliff-edge.
Which category you fall into depends upon how much your turnover (revenue from customers) fell in 2020-21 compared (usually) to 2019-20. If it didn't fall at all, you’ll get nothing. If it fell by less than 30%, you’ll get the 30% grant (well done to HM Treasury for using the exact same percentage for two wholly different purposes, which is not at all confusing), capped at £2,850. If it fell by more than 30%, you’ll get the 80% grant, capped at £7,500. (By the way, if you started in self-employment during 2019-20 and weren’t self-employed at all in the previous three years, you’ll also get the 80% grant, and don’t even have to tell HMRC about your turnover).
If 2019-20 was atypical for some reason, then you can use 2018-19 for the comparison, though you need to be able to justify why 2019-20 was unusually low and thus an unreasonable starting point for the comparison. Examples HMRC give in their guidance include being on long term sick leave or parental leave, or losing a large contract.
There are some traps you could fall into if you’re not careful. If you’ve more than one self-employed business, you have to look at the turnover of them all put together, not just the “main” one. And if one of your tax returns had turnover for a period other than 12 months because of a change of accounting period, you have to annualise it before doing the comparison. Members of partnerships must use the turnover for the whole partnership, not just their share of it.
Importantly, you should NOT include previous SEISS grants in your turnover (which is logical, nobody would have imagined you should), and you should NOT include money received under the Eat Out To Help Out scheme (which is not quite so logical, as that’s money that was actually reflected in till receipts and VAT returns and so someone might reasonably consider it to be part of the revenue of their business).
HMRC have uploaded a video to YouTube with some guidance about how to work out your turnover but it’s not necessarily very good. They accurately say if a tax return has been completed (many applicants have already submitted their 2020-21 return, of course) then you can just take the number from the return. But they suggest that if you haven’t yet done the return, you could look at your bank statements and add up the money coming in. That’s no good for a typical business that doesn’t use the cash basis, though, because it doesn’t take into account opening and closing debtors, for example. Some of our 2020-21 turnover didn’t turn up in our bank account until invoices were paid after the end of the year.
In any case, you’ve until 30 September to claim (if you qualify). So, if you haven’t done it, perhaps you should get your tax return done first!
Comments