The Chancellor set out a Winter Economy Plan in September, with various measures to support the economy through further COVID-19 restrictions over winter. These include a six month extension to the self-employment income support scheme (SEISS), originally scheduled to end on 31 October. This was intended as an equivalent to the extension of employment support measures under the new Job Support Scheme, and has since been made more generous in line with the extension of the Job Retention Scheme.
The scheme originally provided two taxable grants, each covering a three month period. The extension means that two further grants can be claimed, extending the scheme over the period 1 November to 30 April.
As before, the trader must intend to continue trading. The new grants can only be claimed by those who are:
- actively trading but impacted by reduced demand due to COVID-19 or
- were previously trading, but are temporarily unable to do so due to coronavirus.
The support will be paid directly to those eligible, but dates for payment have not yet been set.
Who is eligible for support?
The extended scheme is open to those who are self-employed, including partners in partnership, and who:
- carry on a trade that has been impacted by reduced demand due to COVID-19, on or after 1 November 2020;
- have trading profits, or average trading profits, under £50,000 before offset of any prior year losses;
- have over 50% of their taxable income from self-employment;
- submitted a 2018/19 income tax return by 23 April 2020, as HMRC will use self-employment data from that year’s returns to assess eligibility;
- traded in the 2018/19 and 2019/20 tax years; and
- intend to continue trading.
The first two conditions must be met in either the 2018/19 tax year, or as an average over the past three tax years (2016/17, 2017/18, and 2018/19), or two if they began trading in 2017/18. Parents of a new child who took time away from trading in 2018/19 can base their eligibility on 2017/18, or the 2017/18 and 2016/17 average. They will also be treated as trading in 2019/20 if still on parental leave in that period.
Those who started trading in 2019/20 are excluded from the scheme, which was done intentionally as a measure to minimise fraudulent claims.
The eligibility rules are similar to those for the first part of the scheme, but not having claimed a previous grant does not prevent a trader from claiming a subsequent one. This will be most common where the business was not adversely impacted until after the deadline to claim the previous grants.
Non-UK residents are eligible for the grant, provided that their UK trading profits are at least equal to their other worldwide income.
HMRC has published examples of those it would count as adversely affected for the purpose of eligibility.
How much will the support be?
Each grant covers three months’ worth of average monthly profits. The average monthly profits will be calculated over three tax years, 2016/17, 2017/18, and 2018/19 where applicable.
The first payment under the extension is set at up to 80% of these profits, and is capped at £7,500 in total, the same level as the initial grant. This covers November to January. When first announced, this was set at 20%, but has been increased to 80% to account for changing circumstances and new restrictions.
The level of the second extension grant, covering February to April, has not yet been set.
How can the self-employed make claims?
Applications for the third grant will open on 30 November. HMRC will provide guidance on how to make claims in due course.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.