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Fifth Self-Employment Grant – Fifth SEISS self-employed grant what date and how to apply

  • HMRC issues new guidance on SEISS grant
  • Under the Coronavirus Act 2020, HMRC should only make SEISS payments to businesses that have been adversely affected by COVID-19
  • Business turnover determines the value of the 5th grant
  • Are SEISS claimants facing hefty tax bills?

Last year, UK Chancellor Rishi Sunak made a Treasury Direction in the Coronavirus Act 2020, setting out the legal framework for the Self-Employment Income Support Scheme (SEISS) and the role of Her Majesty’s Revenue and Customs (HMRC).

Mr Sunak introduced SEISS to support self-employed workers whose income had been adversely affected by the impact of the coronavirus.

Since May 2020, the Treasury has issued four grants, with the first covering the period between March 2020 and May 2020. HMRC received approximately 2.6 million claims for the first grant, which was worth up to GBP 7,500.

During his March Budget speech, the Chancellor announced the fourth and fifth grants, which, unlike the first three payments, would open to those who became self-employed during the 2019/20 financial year.

Today, HMRC released further guidance on the 5th grant for the SEISS scheme, which has already helped millions of freelancers weather the pandemic storm.

The HMRC’s new guidance delivers information on eligibility criteria, circumstantial exceptions and how the grant is treated regarding income tax and national insurance contributions.

Whether you’ve applied for previous grants or you’re considering making a claim, check your eligibility status via GOV.uk to avoid being disappointed.

Britons can now check whether they are eligible to claim against a new three-step criteria, which HMRC introduced to make the application process less confusing.

SEISS grant for self-employed workers

What are the new criteria for SEISS?

The first step of the criteria relates to a person’s trading status and the period they traded.

Under Stage 1, the individual must prove they were self-employed or a member of a partnership and traded in the:

  • 2019/20 fiscal year
  • and the 2020/21 financial year

People that worked through a limited company or trust are not eligible for the grant.

Stage 2 of the SEISS criteria looks at an individual’s tax returns and trading profits during the 2019/20 financial year.

To file a claim, you must have submitted this information to HMRC no later than March 2nd 2021, and have trading profits worth no more than GBP 50,000.

These trading profits must also be equal to or greater than any non-traded income (earnings made outside of the business, e.g. pensions or part-time employment) to be deemed eligible for the grant.

If HMRC finds that you are eligible after assessing your tax returns and trading profits, they will contact you by mid-July.

The third and final step of the criteria examines whether the self-employed person can make a claim.

When making a claim, the individual must inform HMRC:

  • Whether they intend to keep trading during the 2021/22 fiscal year
  • Why there is reason to believe that trading profits will reduce significantly between May 1st 2021 and September 30th 2021, due to the impact of the coronavirus pandemic

According to HMRC, it will take some of the following circumstances into account:

  • Whether tax returns are delayed, altered or under enquiry
  • The individual is a member of a partnership
  • Gave birth to a new child (maternity allowance will not impact eligibility)
  • Took out loans covered by the loan charge provisions
  • Claims averaging relief for fluctuating income
  • The person is in the military reserve
  • Non-residents

HMRC will contact eligible self-employed workers from mid-July with details of a personal claim date, with applications open until September end.

Unlike previous grants, HMRC determines the value of the 5th grant based on business turnover for the 12 months starting between April 1st – 6th.

What is business turnover?

Turnover refers to the total amount of money a business has generated due to sales, fees, takings, and earnings made on goods and/or services during a specified period.

According to HMRC, when calculating turnover for the 5th grant, the self-employed does not need to include income on any other tax returns such as previous SEISS grants, devolved administration payments, or Eat Out to Help Out scheme subsidies.

HMRC will need turnover figures to assess the level of grant you are eligible for, with the maximum grant allowance capped at GBP 7,500.

How is turnover calculated?

Turnover is calculated by assessing tax returns for the 2019/20 financial year and previous fiscal periods dating back to the 2016/17 fiscal period if applicable.

There are two levels of grant based on business’ turnover figures, these are:

  • GBP 7,500 if your annual turnover is 30% or more
  • GBP 2,850 is your annual turnover is less than 30%

Before making a claim, freelancers should calculate their annual turnover starting any date between April 1st 2020 and April 6th 2020.

To assess whether you are eligible for the higher grant, divide your average trading profit by 12 and multiply by three. Then, work out 80% of that figure to see if it meets the criteria; if not, work out 30% to see if you’re eligible for the lower grant.

While the instalment covers the May – September period, it’s worth highlighting that the total grant is only worth 80% of three months average trading profits, and the lower payment, 30% of average trading profits.

Dan Stopp, UK Accounting Manager at Bokio, noted that “the 5th instalment differs to earlier grants, in that the amount claimants will receive is based on the reduction to annual turnover during the previous fiscal year.”

If you were self-employed before the 2020/21 trading year, you would need to produce turnover figures for pre-pandemic tax years.

However, claimants should also note that if you’ve benefited from the SEISS scheme, you could be facing hefty tax bills in 2022.

SEISS claimants told to brace for hefty tax bills

According to the chartered accountancy firm Brian Alfred, self-employed workers, particularly those registered with the Construction Industry Scheme (CIS), could be facing significant tax bills if they took applied for SEISS grants.

Senior Tax Manager Stephen Chapman urged freelancers to complete self-assessment forms earlier than usual and prepare for any shocks, as they may not receive any money back if they have received SEISS pay-outs.

Most self-employed construction workers are CIS registered, meaning deductions of withholding tax on 20% – 30% invoices are usually counted towards their tax and NI contributions.

Instead, they complete self-assessment forms declaring earnings and expenses to claim back money from HMRC, often amounting to several thousand British pounds (GBP).

However, Brian Alfred believes that anyone who has claimed under the SEISS scheme is unlikely to receive tax rebates for the 2021/22 financial year and urged CIS registered workers to submit self-assessment forms now to determine how much they owe HMRC.

Mr Chapman said that it is better to act now and understand your tax situation to plan ahead and overcome possible challenges.

He warned that failure to take timely action could result in an unexpected bill to pay by January-end 2022 with a four-week turnaround to find the funds.

Stephen Chapman added: “Lots of people have already submitted their self-assessments in April and May in response to the new tax year and are already finding that they are not receiving the rebates which they have become so accustomed to.”

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