The 4th and 5th SEISS grants
The government has released more information relating to the 4th grant which will cover the period from February 2021 to April 2021.
Eligibility for the 4th and 5th grants will be based on the 2019/2020 tax return as submitted by midnight on Tuesday 2 March and so the grants will now be open to those that became self-employed from 6 April 2019. This was not the case in respect of the earlier grants.
Capped at £7,500 the 4th grant will be again set at 80% of three months’ average trading profits.
There will also be a 5th grant covering May to September 2021 and will take the individual’s trading position for 2020/2021.
The 5th grant will be worth:
- 80% of three months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more; or
- 30% of three months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%.
The proposal is that for any grant received on or after 6 April 2021 it will be taxable in the tax year of receipt. Grants 4 and 5 are thus likely to be taxable in 2021/2022. We explore how this might differ for partnerships later.
HMRC will contact those that are eligible and the claims for the 4th grant can be made from ‘late April 2021’. The 5th grant can be claimed from late July 2021.
There is no requirement that an earlier SEISS grant has been claimed in order to be able to claim the upcoming 4th grant.
The overall qualifying criteria for the 4th grant is the same as it was for the original SEISS and the 3rd grant.
The grants are taxable income and are also subject to National Insurance contributions (NICs). The tax treatment of the SEISS payment overrides GAAP or the cash basis.
HMRC does not define what they mean by a ‘significant reduction’ in trading profits but they do provide the following contrasting examples:
- a plasterer cannot get materials due to supply chain issues due to coronavirus. This has reduced the amount of work he can complete and be paid for. He reasonably believes this will significantly reduce his trading profits. He is eligible to claim the third grant.
- a plasterer cannot get materials due to supply chain issues due to coronavirus. This has reduced the amount of work he can complete and be paid for, but he manages to quickly find a new supplier. He does not believe that the reduced demand will cause a significant reduction in his trading profits. He is not eligible to claim the third grant.
Eligibility criteria for the 4th and 5th grants:
The 2019/2020 tax return must have been submitted by 2 March 2021 and show self-employment/partnership trading profits to be no more than £50,000 and at least equal to non-trading income.
If this is not the case then HMRC can look at the tax years 2016-17, 2017-18, 2018-19 as well as 2019-20.
You must also have traded in both tax years:
- 2019-20; and
You must either:
- be currently trading but are impacted by reduced demand due to coronavirus; and
- have been trading but are temporarily unable to do so due to coronavirus.
You must also declare that:
- you intend to continue to trade
- you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus
Making a claim
It is crucial to observe that HMRC will contact and invite those that are eligible to apply. Applications will need to be made online when the invitations have been issued by HMRC. HMRC states: ‘Your tax agent or adviser cannot make the claim for you. You must make the claim yourself.’
The taxpayer will need a Government Gateway user ID and password and they can create one when they use the eligibility tool (see above). They will also need their UTR and NI number as well as their banking details.
This seems an opportune moment to remind readers that HMRC does not send texts or make calls asking for bank or credit card details. If this happens then it is likely to be a scam. Please be wary.
Please follow Gov.uk for further information.
Note: This summary is subject to change at short notice as the government releases its own updates – this summary was last updated Wednesday 3 March 2021.