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Government SEISS guidance updated

To help people that are eligible for the Self-Employed Income Support Scheme (SEISS) the Government has updated its guidance to confirm essential points.

Tax 

The grant will be subject to Income Tax and National Insurance contributions but does not need to be repaid.

Universal Credit

Many people awaiting payment from the SEISS grant may have made applications for Universal Credit. 

The Government has confirmed that you should record the grant as part of your self-employment income and that it may affect the amount of Universal Credit you get. However, it will not affect Universal Credit claims for earlier periods.

Eligibility

Alongside the existing conditions outlines in its previous guidance, HMRC has said that self-employed people will have to confirm that their trading has been adversely affected by Coronavirus. To assess this the tax authority will use a ‘risk-based approach’ to compliance.

Self-Assessment extension

If you have not submitted your Self-Assessment tax return for the tax year 2018 to 2019, you must do this by 23 April 2020 or you will not be able to claim. HMRC has confirmed that it will review any late returns in the usual way.

This is important as HMRC will use data from 2018-2019 tax returns to identify those eligible.

Loan charge

If you are self-employed and have received payment in the form of a loan or any other form of credit covered by the loan charge, you may be able to apply for the grant. 

However, your eligibility and average trading profits will be based on either:

*          the average of the tax years 2016 to 2017 and 2017 to 2018
*          the tax year 2017 to 2018 if you were not self-employed in the tax year 2016 to 2017

You also do not have to file your 2018 to 2019 Self-Assessment tax return by 23 April 2020. You should file by the 30 September 2020.

Claims process 

Self-employed individuals are unable to claim until HMRC has contacted them to confirm eligibility. The tax authority has said that it aims to contact those that are eligible by mid-May and will invite people to claim using the GOV.UK online service, which is currently being developed. 

If you’re unable to claim online an alternative way to claim will be made available to you, details of which HMRC hopes to announce soon. 

You should not contact HMRC, as it has said this will only delay the urgent work being undertaken to introduce the scheme.

Once a claim is processed

Once HMRC has received a claim and the grant is approved, it will contact you to tell you how much you’ll get and the payment details. HMRC has re-iterated that it will make payments by early June 2020.

How total income and trading profits will be calculated for the Self-Employed Income Support Scheme

You can claim for the Self-employment Income Support Scheme (SEISS) if you’re a self-employed individual or a member of a partnership and you:

*          have submitted your Self-Assessment tax return for the tax year 2018 to 2019
*          traded in the tax year 2019 to 2020
*          are trading when you apply, or would be except for coronavirus
*          intend to continue to trade in the tax year 2020 to 2021
*          have lost trading profits due to coronavirus

To be eligible for the scheme your trading profits must also be no more than £50,000 and more than half of your total income for either:

*          the tax year 2018 to 2019
*          the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

HMRC has confirmed that eligibility and how the grant is paid will be based on your total income and trading profits and has released detailed guidance on what will count. 

Calculating trading profits

HMRC will use the figures on your tax returns for your total trading income, more commonly referred to as turnover and deduct all allowable business expenses and capital expenditure.

The expenses include:

*          office costs
*          travel costs
*          clothing expenses
*          staff costs
*          things bought to sell on
*          financial costs
*          costs of your business premises
*          advertising or marketing
*          training courses 

HMRC will also take into consideration: 

*          any business expenses deducted through the trading allowance
*          capital allowances used to buy assets used in your business
*          qualifying care relief
*          flat rate expenses

Any losses carried forward from previous years and the personal allowance will not be deducted from trading profits. 

Calculating Total Income

HMRC will also consider other income reported on your self-assessment return. Your total income is the total of all your:

*          income from earnings
*          trading profits
*          property income
*          dividends
*          savings income
*          pension income
*          miscellaneous income (including social security income)

Eligibility

Your trading profits must be no more than £50,000 and more than half of your total income for either:

*          the tax year 2018 to 2019
*          the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

To help people interpret these rules, HMRC has published helpful examples online that demonstrate how the rules will be applied, which can be found by clicking here. 

You cannot apply for this scheme yourself. HMRC will aim to contact you by mid-May 2020 if it believes you are eligible and will make payments by early June 2020.

If you are not contacted but believe you may be eligible for the scheme, please speak to our team at the earliest opportunity.