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The SEISS4 Grant: Eligibility, Payment, and Repayment

10th May 2021 | Written by In Accountancy | Categories : CoronaVirus, News, Personal Tax, Small Business Advice, Sole Traders, Tax Advice
The SEISS4 Grant: Eligibility, Payment, and Repayment

With the latest round of SEISS4 Grant funding being paid out presently (or not as the case may be!), we thought it timely to draw your attention to the rules surrounding this tranche of funding, as well as some little known facts about repayment!

What is an SEISS4 grant?

The Self-Employment Income Support Scheme (SEISS) grant financially supports those that are self-employed, or a member of a partnership, and have been impacted by COVID-19.

Am I eligible?

To be eligible, you must:

  • Be a self-employed individual, or a member of a partnership (you cannot claim the grant if you trade through a limited company or trust).
  • Have traded in both the 2019/20 and 2020/21 financial years and submitted your 2019/20 tax return on or before 2 March 2021.
  • Have had trading profits equal to or below £50,000 and at least equal to (or more than) your non-trading income.*
  • Be currently trading (those temporarily unable to trade due to COVID-19 will still be eligible).

You must also declare that you:

  • Intend to continue trade.
  • Reasonably believe that there will be a significant reduction in your profits.

*HMRC look at your 2019/20 self-assessment tax return to determine eligibility. If your 2019/20 self-assessment tax return deems you ineligible, HMRC will look at your tax return for the financial years 2016/17, 2018/19 and 2019/2020 combined.

Information on the upcoming SEISS 5 grant is included later in the article. Conditions of eligibility have changed.

Reasonable Belief

Before you make a SEISS4 claim, you must hold reasonable belief that your trading profits are going to be significantly lowered due to reduced business activity, capacity, demand, or an inability to trade due to COVID-19 between 1 February 2021 and 30 April 2021.

You must keep supporting evidence to show that your business has indeed been negatively impacted by COVID-19, resulting in less business activity than originally expected.

You do not have to consider any other coronavirus support schemes that you have received when deciding if you have had a significant reduction in your trading profits.

Circumstances that affect your eligibility

Your eligibility for the SEISS4 grant will be affected if:

  • Your return is late, amended or under enquiry
  • You are a member of a partnership
  • You had a new child
  • You have loans covered by the loan charge provisions
  • You claim averaging relief
  • You are a military reservist
  • You are a non-resident or chose the remittance basis

*Maternity allowance will not affect your eligibility

How much will I receive from the SEISS4 grant?

The SEISS4 grant amount will be 80% of your 3 months’ average trading profits.

It will be paid out in a single instalment and capped at £7,500 in total.

HMRC work out your average trading profits by using your submitted tax returns from the last 4 financial years.

You may receive a higher or lower amount than previous grants due to the nature of this calculation.

If you have a gap in the years you have traded, HMRC will use your most recent tax returns to work out the grant.

Work out how much you’ll receive in 4 simple steps

  1. Calculate your average trading profit (eg/£42,000)
  2. Divide by 12 (£3,500)
  3. Multiply by 3 (£10,500)
  4. Find 80% of £10,500 = £8,400

You will only receive £7,500 due to the total cap.

How to make a claim

Click the following link to make your claim:

Claim a grant through the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)

How the SEISS4 grant is treated

The SEISS4 grant is subject to Income Tax and self-employed National Insurance contributions. It must be reported on your 2021/22 self-assessment tax return.

The grant also counts towards your annual allowance for pension contributions.

SEISS grants are not counted as ‘access to public funds’ – you can claim the grant on all categories of work visa.

What about the upcoming SEISS5 grant?

There will be a fifth self-employment grant covering May 2021 to September 2021.

You will be able to claim from late July if you are eligible for the fifth grant.

How much will I receive?

The amount you will receive will be determined by how much your turnover has been reduced by between April 2020 and April 2021.

For those with a turnover reduction of more than 30%:

  • You will receive 80% of 3 months’ average trading profits, capped at £7,500

For those with a turnover reduction of less than 30%:

  • You will receive 30% of 3 months’ average trading profits, capped at £2,850

Additional guidance on the SEISS5 grant will be provided in due course. Visit Latest Accounting and Taxation News from IN Accountancy (in-accountancy.co.uk) to stay up to date.

The Hidden SEISS4 Repayment Rule

Within the SEISS4 documentation is a small repayment clause – one that is well hidden and that not many people are aware of…

The Repayment Rule

If you are claiming an SEISS4 grant, and an amended tax return from 2016/17 through to 2019/20 is submitted on or after 3 March 2021, you will be required to repay your grant. This is only for amendments that were taken into account when calculating eligibility or amount of grant.

HMRC will decide how much you must pay back.

What happens if I submit an amended tax return after the 3 March 2021?

If the amendment would have resulted in you no longer being eligible for the grant, you will need to pay it back in full.

If the amendment would have resulted in a lower grant being received, you will need to repay the excess amount.

If an amendment has been submitted after that date, but before claiming SEISS5, you should recalculate the amount they receive and pay back any excess to HMRC as soon as possible.

Are there any exceptions?

Yes.

No SEISS4 grant repayment is needed if:

  • The amount of the SEISS4 grant received was £100 or less
  • The excess to be repaid is £100 or less

This only applies to SEISS4 claims.

You do not have to pay back any amounts received from previous grants – any amendment made after 26 March 2020 is effectively ignored.

What should I do if I submitted an amended tax return that may affect my SEISS4 grant?

You should contact HMRC as soon as possible via the following link:

Tell HMRC and pay the Self-Employment Income Support Scheme grant back – GOV.UK (www.gov.uk)

Failure to repay your SEISS4 grant may attract interest and some nasty penalties.

If a taxpayer is aware that they need to make a repayment, failure to notify HMRC is deemed deliberate and could result in a penalty of up to 100% of the amount not repaid.

What else should I be aware of?

You are required to check the impact of tax return amendments on your SEISS4 grant, but only for amendments that were taken in account when calculating eligibility or amount of grant.

You can check the impact by reverse engineering the figure (originally calculated by HMRC) and recasting it using the amended tax return figures.

It is therefore highly recommended that you keep a copy of the “How we have worked out your grant amount” information supplied by HMRC when making claims.

Useful Resources

Amending tax returns may mean repaying SEISS grants | AccountingWEB

Check if you can claim a grant through the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)

Claim a grant through the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)

Penalties for not telling HMRC about Self-Employment Income Support Scheme grant overpayments – CC/FS47 – GOV.UK (www.gov.uk)

How your circumstances affect eligibility for the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)

How HMRC works out trading profits and non-trading income for the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)

Contact Details for IN Accountancy | Stockport, Cheshire, SK7 (in-accountancy.co.uk)

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