Fifth SEISS grant – key checks to make

As highlighted in last month’s In Practice, applications for the fifth Self-employment Income Support Scheme (SEISS) are open for self-employed individuals and members of a partnership and claims must be made by 30 September 2021.

Like the previous four grants, this grant is also subject to income tax and national insurance, and must be reported on the taxpayer’s 2021/22 self-assessment tax return. The grant also counts towards the taxpayer’s annual allowance for pension contribution purposes.

What are the eligibility criteria?

To be eligible for the fifth grant, taxpayers must have:

• traded in 2019/20 and 2020/21
• submitted their 2019/20 tax return by 2 March 2021
• trading profits of no more than £50,000 and at least equal to their non-trading income for either:
  • 2019/20; or
  • the average of 2016/17, 2017/18, 2018/19 and 2019/20.

Taxpayers must also declare that:

• they intend to continue trading in 2021/22; and
• that they reasonably believe there will be a significant reduction in their trading profits due to Covid-19 between 1 May 2021 and 30 September 2021.

How much grant is available?

Taxpayers will fall into one of two levels of grant based on how much the taxpayer's turnover has reduced:

1. A turnover reduction of 30% or more – the grant will be 80% of three months’ average trading profits, capped at £7,500
2. A turnover reduction of less than 30% – the grant will be based on 30% of three months’ average trading profits, capped at £2,850.

HMRC will not ask for any turnover figures if a taxpayer started trading in 2019/20 and did not trade in 2016/17 to 2018/19. These taxpayers will receive a grant based on 80% of trading profits.

How to calculate the turnover reduction

Unlike the earlier grants, taxpayers are required to calculate turnover and then compare two turnover figures:

1. turnover for 2020/21 (Pandemic year) –a 12-month period starting between 1 and 6 April 2020
2. reference year turnover – previous year turnover for 2019/20 (or 2018/19 – if 2019/20 was not a normal year).

Taxpayers should get both figures ready prior to making their claim.  

Turnover for 2020/21 (pandemic year)

For this turnover figure, the 12-month period must start on any date from 1 April 2020 to 6 April 2020. Turnover will cover one of the periods as below:

• 1 March 2020 - 31 March 2021; or
• 6 April 2020 – 5 April 2021.

So, if taxpayers have a different year end as compared to the above, they will require to apportion two years’ results to arrive at the turnover for 2020/21.

The guidance states that for businesses that started or ceased during the year, the turnover reported will be for less than 12 months.

Taxpayers should include the turnover for all businesses but exclude all other income including Covid-19 support payments, such as previous SEISS grants, Eat Out to Help Out payments and local authority or devolved administration grants.

Reference year turnover

For most, the second turnover figure required will be the total turnover from all businesses as reported in their 2019/20 tax return.

However, where this was not considered to be a ‘normal year’, taxpayers can use the turnover reported in their 2018/19 return indicating why 2019/20 was not a normal year. HMRC provides examples where the taxpayer:

• was on carers’ leave, long term sick leave or had a new child
• carried out reservist duties
• lost a large contract
• is eligible for the fifth grant but did not submit a 2019/20 return.

Different accounting period

Where a taxpayer has an accounting period that is longer or shorter than 12 months, this must be adjusted to a 12-month figure.

Example 1

If the taxpayer has a 15-month accounting period and declared a turnover of £45,000 on their 2019/20 tax return, to get their 12-month turnover for 2019/20 they could:

1. divide their 15-month figure by 15 to get their turnover for one month
2. multiply this by 12.

However, if this method does not produce a fair result an alternative reasonable method may be used.

Example 2

Where a taxpayer has a short accounting period recorded in their 2019/20 return, this must be adjusted to 12 months.

Say they had:

• an eight-month period and declared turnover of £16,000 on 2019/20; and
• a 12-month accounting period in 2018/19 and declared a turnover of £24,000.

The 12-month reference period is calculated by adding four months of the turnover from their 2018/19 tax return (£8,000) to the eight months of turnover from their 2019/20 tax return (£16,000) to give £24,000 as the reference period turnover.

Partners in a partnership must provide turnover figures for the whole partnership. However, where they have other businesses, they must use their share of the partnership turnover.

Comparison

Once both the above turnover figures are calculated, the two must be compared.

Where the 2020/21 pandemic year turnover is less than the reference period turnover, the fifth SEISS grant is available at either the higher or lower level detailed above.

HMRC has provided examples which can be used as a reference to cross check the eligibility of the grant level.

ACCA members should also refer to ACCA’s guidance on Professional Conduct in Relation to Taxation, which includes a new factsheet on how to deal with tax returns that include claims for SEISS grants.

Members should also bear in mind their obligations under Professional Conduct in Relation to Taxation (PCRT) and anti-money laundering regulations when assisting clients in completing their self-assessment tax returns where they know or have reasonable cause to believe that the clients have claimed SEISS grants. 

Members should refer to ACCA’s guidance on PCRT obligations for SEISS grants.